Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 194560 June 11, 2014

NESTOR T. GADRINAB, Petitioner,

vs.
NORAT. SALAMANCA, ANTONIO TALAO AND ELENA LOPEZ, Respondents.

DECISION

LEONEN, J.:

A judgment on compromise agreement is a judgment on the merits. It has the effect of res judicata,
and is immediately final and executory unless set aside because of falsity or vices of consent. The
doctrine of immutability of judgments bars courts from modifying decisions that have already attained
finality, even if the purpose of the modification is to correct errors of fact or law.

This Rule 45 petlt10n seeks the review of the Court of Appeals' Decision1 dated July 22, 2010 and its
resolution2dated November 19, 2010.

The Court of Appeals dismissed petitioner’s appeal and affirmed the Regional Trial Court’s decision
granting respondent Salamanca’s motion for physical partition pending the execution of a judgment
on compromise agreement between the parties.

Respondents, together with Adoracion Gadrinab and Arsenia Talao, are siblings and heirs of the late
Spouses Talao, Nicolas and Aurelia.3 The Spouses Talao died intestate, leaving a parcel of land in
Sta. Ana, Manila.4

The five Talao children divided the property among themselves through an extrajudicial
settlement.5 Subsequently, Arsenia Talao waived her share over the property in favor of her siblings.6

Respondent Salamanca filed a complaint for partition against her siblings, Antonio, Elena
(deceased, now represented by her husband, Jose Lopez), and Adoracion (deceased, now
represented by heirs, petitioner Nestor and Francisco Gadrinab) before the Regional Trial Court of
Manila.7

All parties claimed their respective shares in the property.8 They also claimed shares in the rentals
collected from one of the units of a duplex apartment on the property.9 The total amount of rental
collection in the possession of Jose Lopez was 528,623.00.10 The amount, according to Jose’s
counsel, was ready for distribution.11

Upon being referred to mediation, the parties entered into a compromise agreement and stipulated
the following:

1) That the subject property (land with all the improvements) situated at 2370 Nacar Street,
San Andres, Sta. Ana, Manila will be subject for sale and the amount will be divided among
the four (plaintiff and defendants);
 2) That the subject property will be appraised by independent appraiser and the appraised
value will be divided into four. Mr. Antonio Talao will pay in advance the share of Francisco
Gadrinab immediately after the report of the said appraisal;

3) That Cuervo Appraiser will be the one who appraised [sic] the property on or before March
21, 2003 and any appraised value shall binding [sic] on all parties;

4) That the rental collection in its total amount of Five Hundred Twenty Eight Thousand and
Six Hundred Twenty Three Pesos (528,623.00) and the uncollected amount up to February
2003 once collected will be divided among the parties;

5) That the amount of 528,623.00 divided by four be distributed among the parties will be
given to all parties on or before March 12, 2003 by Mr. Antonio Talao;

6) That upon payment of the appraised value to Francisco Gadrinab, Mr. Nestor Gadrinab is
given forty-five (45) days within which to leave the premises in question;

7) That the parties agreed to waive all their claims and counter-claims arising from this case;
and

8) That the parties agreed to request this Honorable Court that a decision be issued base
[sic] on this Compromise Agreement or this Compromise Agreement be submitted before
this Honorable Court for approval.12

On April 10, 2003, the Regional Trial Court approved the compromise agreement.13 Based on the
entry of judgment, the case became final and executory on April 10, 2003.14

Nestor Gadrinab filed a motion for execution of the compromise agreement.15 He demanded his one-
fourth share in the accumulated rentals.16 During the hearing on the motion for execution, the parties
agreed that the rentals shall be divided only into three since Nestor had already been occupying one
of the duplex units.17 The parties also agreed that Antonio Talao would shoulder Nestor’s share,
equivalent to one-fourth of the rental amount.18

Pursuant to the compromise agreement, Cuervo Appraiser appraised the property.19 Unsatisfied with
the appraisal, Antonio Talao moved for the property’s reappraisal.20 This was denied by the Regional
Trial Court.21

The portion of the duplex that Nestor refused to vacate,22 remained unsold.23

Because of the attitude of her co-heirs, respondent Salamanca moved for the physical partition of
the property before the Regional Trial Court of Manila.24 She prayed for the physical partition of the
property instead of having it sold.25

Nestor and Francisco Gadrinab opposed the motion.26 They contended that the judgment on the
compromise agreement had already become final and executory and had the effect of res
judicata.27 Antonio Talao and Jose Lopez did not object to the motion for physical partition.28

On December 29, 2005, the Regional Trial Court of Manila granted the motion for physical partition.29
Nestor and Francisco Gadrinab appealed to the Court of Appeals. They assailed the grant of
Salamanca’s motion for physical partition after the issuance of the judgment on compromise
agreement.30

In a decision promulgated on July 22, 2010,31 the Court of Appeals dismissed the appeal. The Court
of Appeals ruled that the exception to the immutability of judgments, that is, "whenever
circumstances transpire after the finality of the decision rendering its execution unjust and
inequitable,"32 applies in this case. The Court of Appeals specifically noted that the "parties’
seemingly endless disagreements on matters involving the disposition of the subject property"33 were
such circumstances that rendered the compromise agreement’s execution unjust and inequitable.
The Court of Appeals agreed with the Regional Trial Court’s ruling that "the proposed physical
partition of the subject lot . . . is just another way of enforcing the [c]ourt’s decision and will not in
anyway vary the parties’ agreement nor affect their right over the property."34

On November 19, 2010, the Court of Appeals denied petitioner’s motion for reconsideration.35

Hence, this petition was filed.

Petitioner argued that the Court of Appeals erred in affirming the Regional Trial Court’s order
granting respondent Salamanca’s motion for physical partition.36 A judgment on the compromise
agreement had already been rendered and had attained finality.37 Petitioner also argued that the
Court of Appeals failed to consider the following terms of the compromise agreement:

2. That the subject property will be appraised by independent appraiser and the appraised
value will be divided into four (4). Mr. Antonio Talao will pay in advance the share of
Francisco Gadrinab immediately after the report of the said appraisal;

....

4. That the rental collection in its total amount of FIVE HUNDRED TWENTY EIGHT
THOUSAND SIX HUNDRED TWENTY THREE PESOS (Php528,623.00) and the
uncollected amount up to February 2003 once collected [sic] will be divided among the
parties;

5. That the amount of FIVEHUNDRED TWENTY EIGHT THOUSAND SIX HUNDRED

TWENTY THREE PESOS Php528,623.00 divided by four (4) among the parties will be given
to all parties on or [sic] March 12, 2003 by Mr. Antonio Talao at Greenbelt, Mc Donald at
9:00 o’clock in the morning;

6. That upon payment of the appraised value to Mr. Francisco Gadrinab, Mr. Nestor
Gadrinab is given forty five (45) days within which to leave the premises in
question[.]38 (Emphasis in the original)

Petitioner alleged that the judgment on the compromise agreement had already been partially
complied with, as respondent Salamanca had already been paid her share in the accrued
rentals.39 On the other hand, petitioner still had not been paid his share,40 prompting him to file the
motion for execution.41

Petitioner pointed out that there was no agreement that he must vacate the property before it could
be sold.42
Moreover, petitioner argued that the Court of Appeals’ decision violated his right to due
process.43 According to him, had there been a full-blown trial on the action for partition, he would
have been able to present evidence of exclusive possession of half of the property.44

In their separate comments, respondents Salamanca and Talao argued that this case fell under the
exception of the rule on immutability of judgments.45 The non-compliance of some of the parties with
the compromise agreement constituted an event that "[makes] it difficult if not totally impossible to
enforce the compromise agreement."46

Respondents Salamanca and Talao also argued that the physical partition of the property would not
prejudice the parties.47 The order granting the motion for physical partition was a mere enforcement
of the compromise agreement, which entitled the parties to their shares in the proceeds of the
sale.48 Respondent Salamanca pointed out that the grant of the motion for physical partition would
still be consistent with the intent of the compromise agreement since it would result in the proceeds
being divided equally among the parties.49 "The Order granting the physical partition was within the
inherent power and authority of the court having jurisdiction to render a particular judgment to
enforce it and to exercise equitable control over such enforcement."50

Moreover, petitioner’s refusal to vacate the property prevented it from being sold so that the
proceeds could already be distributed among the parties.51

On the violation of due process, respondents Salamanca and Talao argued that it was only before
this court that this issue was raised.

The issue in this case is whether the Court of Appeals erred in affirming the Regional Trial Court’s
decision allowing the physical partition of the property despite finality of a previous judgment on
compromise agreement involving the division of the same property.

The petition is meritorious.

The Court of Appeals erred in

affirming the Regional Trial
Court’s decision allowing the
physical partition of the property

Respondent Salamanca filed two actions for physical partition. The two parties settled the first action
through a judicial compromise agreement. The same respondent filed the second action after she
had determined that her co-heirs were not being cooperative in complying with the compromise
agreement.

In a compromise agreement, the parties freely enter into stipulations. "[A] judgment based on a
compromise agreement is a judgment on the merits"52 of the case. It has the effect of res judicata.
These principles are impressed both in our law and jurisprudence.

Thus, Article 2037 of the Civil Code provides:

Article 2037. A compromise has upon the parties the effect and authority of res judicata; but there
shall be no execution except in compliance with a judicial compromise.

In Spouses Romero v. Tan,53 this court said:

It is well settled that a judicial compromise has the effect of res judicata and is immediately
executory and not appealable unless set aside [by mistake, fraud, violence, intimidation, undue
influence, or falsity of documents that vitiated the compromise agreement].54

There is res judicata when the following concur:

1. Previous final judgment;

2. By a court having jurisdiction over the parties and the subject matter;

3. On the merits of the case;

4. Between identical parties, on the same subject matter, and cause of action55

There are two rules that embody the principle of res judicata. The first rule refers to "bar by prior
judgment,"56 which means that actions on the same claim or cause of action cannot be
relitigated.57 This rule is embodied in Rule 39, Section 47, paragraph (b) of the Rules of Court, which
provides:

Section 47. Effect of judgments or final orders. — The effect of a judgment or final order rendered by
a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as
follows:

(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to
any other matter that could have been raised in relation thereto, conclusive between the parties and
their successors in interest by title subsequent to the commencement of the action or special
proceeding, litigating for the same thing and under the same title and in the same capacity[.]

The second rule refers to "conclusiveness of judgment."58 This means that facts already tried and
determined in another action involving a different claim or cause of action cannot anymore be
relitigated.59 This rule is embodied in Rule 39, Section 47, paragraph (c) of the Rules of Court, which
provides:

Section 47. Effect of judgments or final orders. — The effect of a judgment or final order rendered by
a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as
follows:

....

(c) In any other litigation between the same parties or their successors in interest, that only is
deemed to have been adjudged in a former judgment or final order which appears upon its face to
have been so adjudged, or which was actually and necessarily included therein or necessary
thereto. (49a)

This case involves "bar by prior judgment." Respondents cannot file another action for partition after
final judgment on compromise had already been rendered in a previous action for partition involving
the same parties and property.

This court explained in FGU Insurance Corporation v. Regional Trial Court60 the doctrine of finality of
judgment:
Under the doctrine of finality of judgment or immutability of judgment, a decision that has acquired
finality becomes immutable and unalterable, and may no longer be modified in any respect, even if
the modification is meant to correct erroneous conclusions of fact and law, and whether it be made
by the court that rendered it or by the Highest Court of the land. Any act which violates this principle
must immediately be struck down.61

This doctrine admits a few exceptions, usually applied to serve substantial justice:

1. "The correction of clerical errors;

2. the so-called nunc pro tunc entries which cause no prejudice to any party;

3. void judgments; and

4. whenever circumstances transpire after the finality of the decision rendering its execution
unjust and inequitable."62

Doctrines on bar by prior judgment and immutability of judgment apply whether judgment is rendered
after a full-blown trial or after the parties voluntarily execute a compromise agreement duly approved
by the court.

Because a judicial compromise agreement is in the nature of both an agreement between the parties
and a judgment on the merits, it is covered by the Civil Code provisions on contracts. It can be
avoided on grounds that may avoid an ordinary contract, e.g., it is not in accord with the law;63 lack of
consent by a party; and existence of fraud or duress. Further, the pertinent Civil Code provisions on
compromise agreements provide:

Article 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence,
or falsity of documents is subject to the provisions of Article 1330 of this Code.

Article 1330. A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable.

Therefore, courts cannot entertain actions involving the same cause of action, parties, and subject
matter without violating the doctrines on bar by prior judgment and immutability of judgments, unless
there is evidence that the agreement was void, obtained through fraud, mistake or any vice of
consent, or would disrupt substantial justice.

In this case, there was no issue as to the fact that the parties freely entered into the compromise
agreement. There was also no dispute about the clarity of its terms. Some of the parties simply do
not wish to abide by the compromise agreement’s terms.

This court does not see how substantial justice will be served by disturbing a previous final judgment
on compromise when failure of its execution was caused by the parties themselves.

Likewise, respondents’ argument that a supervening event, i.e. disagreement among the parties,
was present to justify disturbance of the final judgment on compromise fails to persuade. A
supervening event may justify the disturbance of a final judgment on compromise if it "brought about
a material change in [the] situation"64 between the parties. The material change contemplated must
render the execution of the final judgment unjust and inequitable. Otherwise, a party to the
compromise agreement has a "right to have the compromise agreement executed, according to its
terms."65

The subsequent disagreement among the parties did not cause any material change in the situation
or in the relations among the parties. The situation and relations among the parties remained the
same as the situation and their relations prior to the compromise agreement. They remained co-
owners of the property, which they desired to partition.

Moreover, the parties voluntarily agreed to the compromise agreement, which was already stamped
with judicial approval. The agreement’s execution would bring about the effects desired by all parties
and the most just and equitable situation for all. On the other hand, the judgment granting the
second action for partition filed by respondent Salamanca was obtained with opposition.

Judges "have the ministerial and mandatory duty to implement and enforce [a compromise
agreement]."66 Absent appeal or motion to set aside the judgment, courts cannot modify, impose
terms different from the terms of a compromise agreement, or set aside the compromises and
reciprocal concessions made in good faith by the parties without gravely abusing their discretion.67

"[They cannot] relieve parties from [their] obligations . . . simply because [the agreements are] . . .
unwise."68Further, "[t]he mere fact that the Compromise Agreement favors one party does not render
it invalid."69 Courts do not have power to "alter contracts in order to save [one party]

from [the effects of] adverse stipulations. . . ."70

Respondents have remedies if

parties to the compromise
agreement refuse to abide by its
terms

The issue in this case involves the non-compliance of some of the parties with the terms of the
compromise agreement. The law affords complying parties with remedies in case one of the parties
1âwphi 1

to an agreement fails to abide by its terms.

A party may file a motion for execution of judgment. Execution is a matter of right on final judgments.
Section 1, Rule 39 of the Rules of Court provides:

Section 1. Execution upon judgments or final orders. — Execution shall issue as a matter of right, on
motion, upon a judgment or order that disposes of the action or proceeding upon the expiration of
the period to appeal therefrom if no appeal has been duly perfected. (1a)

If the appeal has been duly perfected and finally resolved, the execution may forthwith be applied for
in the court of origin, on motion of the judgment obligee, submitting therewith certified true copies of
the judgment or judgments or final order or orders sought to be enforced and of the entry thereof,
with notice to the adverse party.

The appellate court may, on motion in the same case, when the interest of justice so requires, direct
the court of origin to issue the writ of execution. (n)

If a party refuses to comply with the terms of the judgment or resists the enforcement of a lawful writ
issued, an action for indirect contempt may be filed in accordance with Rule 71 of the Rules of Court:
Section 3. Indirect contempt to be punished after charge and hearing. — After a charge in writing
has been filed, and an opportunity given to the respondent to comment thereon within such period
as may be fixed by the court and to be heard by himself or counsel, a person guilty of any of the
following acts may be punished for indirect contempt;

....

(b) Disobedience of or resistance to a lawful writ, process, order, or judgment of a court, including
the act of a person who, after being dispossessed or ejected from any real property by the judgment
or process of any court of competent jurisdiction, enters or attempts or induces another to enter into
or upon such real property, for the purpose of executing acts of ownership or possession, or in any
manner disturbs the possession given to the person adjudged to be entitled thereto[.]

Since a judgment on compromise agreement is effectively a judgment on the case, proper remedies
against ordinary judgments may be used against judgments on a compromise agreement. Provided
these are availed on time and the appropriate grounds exist, remedies may include the following: a)
motion for reconsideration; b) motion for new trial; c) appeal; d) petition for relief from judgment; e)
petition for certiorari; and f) petition for annulment of judgment.71

Respondent Salamanca knew that the only reason for the failed compromise agreement was the
non-compliance with the agreement’s terms of some of her co-heirs. Particularly, it was stipulated
that petitioner’s removal from the property was conditioned upon payment of an amount equivalent
to his share. Respondent Talao refused to abide by his own undertaking to shoulder respondent
Salamanca’s share. He also refused to acknowledge the appraisal of the appraiser appointed in the
compromise agreement. This refusal caused the failure of the compromise agreement.

Instead of availing herself of the proper remedies so the compromise could be enforced and the
partition could be effected, respondent Salamanca chose to move again for the partition of the
property and set aside a valid and final judgment on compromise. This court cannot allow such
motion to prosper without going against law and established jurisprudence on judgments.

WHEREFORE, the Court of Appeals’ decision is REVERSED and SET ASIDE. The judgment on the
compromise agreement is REINSTATED.

SO ORDERED.

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

WE CONCUR:

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

DIOSDADO M. PERALTA MARTIN S. VILLARAMA, JR.*

Associate Justice Associate Justice

JOSE CATRAL MENDOZA

Associate Justice
 ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 104133 April 18, 1995

SPOUSES EMILIO ABINUJAR and MILAGROS M. LANA, petitioners,

vs.
THE COURT OF APPEALS and SPOUSES SANTIAGO RAMIRO and FLORENTINA RAMIRO, respondents.

QUIASON, J.:

This is a petition for review on ceitiorari under Rule 45 of the Revised Rules of Court of the Decision dated December
27, 1991 and the Resolution dated February 11, 1992 of the Court of Appeals in CA-G.R. SP No. 24683.

On October 10, 1987, petitioners executed a Deed of Sale with Right to Repurchase in favor of private respondents,
involving a residential house located at No. 346 Algeciras St., Sampaloc, Manila. Due to serious financial and business
reverses, petitioners were not able to redeem the property within four months as agreed upon.

On October 24, 1989, private respondents filed a complaint for ejectment in the Metropolitan Trial Court of the City of
Manila, docketed as Civil Case No. 130352-CV against petitioners.
On December 27, 1989, the parties, assisted by their counsels, executed a compromise agreement. In an order dated
March 15, 1990, the Metropolitan Trial Court approved the compromise agreement. The order reproduced the agreement
as follows:

1. That defendants [petitioners herein] agree to pay plaintiffs [private respondents herein] in the
amounts and on the dates specifically indicated herein below:

a. P50,000.00 on Jan. 31, 1990;

b. 10,000.00 on Feb. 28, 1990;
c. 10,000.00 on March 31, 1990;
d. 10,000.00 on April 30, 1990;
e. 10,000.00 on May 31, 1990;
f. 10,000.00 on June 30, 1990;
g. 10,000.00 on July 31,1990;
h. 10,000.00 on August 31, 1990;
i. 10,000.00 on September 30, 1990;

2. That failure on the part of the defendants to pay three (3) consecutive payments, plaintiffs will
be entitled to a writ of execution, unless the parties agree to extend the period of entitlement to a
writ of execution in writing to be submitted and/or approved by this Honorable Court; . . . (Rollo, p.
53).

On April 15, 1990, private respondents filed a motion for execution on the ground that petitioners failed to pay the first
three installments stipulated in the compromise agreement, to wit: P50,000.00 on January 31, 1990; P10,000.00 on
February 28, 1990; and P10,000.00 on March 31, 1990.

On April 6, 1990, petitioners filed an "Urgent Ex-Parte Motion for Reconsideration and/or Correct Order of this Court"
calling attention to a typographical error in the Order dated March 15, 1990, and asking that the amount of P10.000.00
payable on September 30, 1990 be corrected and changed to the agreed amount of P50,000.

On April 25, 1990, the Metropolitan Trial Court issued an order granting the motion for correction of the typographical
error in the decision.

On August 17, 1990, petitioners filed a motion asking that the check payments previously deposited by them with the
court, be accepted and be given to respondents in compliance with their compromise agreement.

On August 23, 1990, respondents opposed petitioners' ex-parte motion and stated that they would not renew the
compromise agreement with petitioners.

The Metropolitan Trial Court denied private respondents' motion for execution dated April 15, 1990 and another similar
motion dated June 26, 1990.

On October 12, 1990, respondents filed a petition for mandamus with us (G.R. No. 95470). In a resolution dated
November 5, 1990, we referred the case to the Executive Judge of the Regional Trial Court, Manila. petitioners moved to
dismiss the petition for mandamus.
On March 14, 1991 the Regional Trial Court denied the motion to dismiss and issued the assailed resolution
commanding the Metropolitan Trial Court to issue a writ of execution of the decision approving the compromise
agreement in Civil Case No. 130352-CV.

In compliance with the said resolution, the Metropolitan Trial Court issued an order dated March 27, 1991 directing the
issuance of a writ of execution to enforce the compromise agreement entered into by the parties.

On April 11, 1991, a "Sheriffs' Notice to Voluntarily Vacate the Premises" was served on petitioner.

Petitioners then filed a petition for certiorari with a prayer for the issuance of a temporary restraining order and a writ of
injunction with the Court of Appeals (CA-G.R. SP No. 24683).

On December 27, 1991, the Court of Appeals dismissed the petition. Likewise, the said court denied the motion for
reconsideration filed by petitioner.

II

Petitioners contend that both the Regional Trial Court and Metropolitan Trial Court acted with grave abuse of discretion,
the former in issuing a resolution directing the Metropolitan Trial Court to issue a writ of execution against petitioners
herein, and the latter, in issuing said writ of execution.

III

A compromise agreement is a contract between the parties, which if not contrary to law, morals or public policy, is valid
and enforceable between them (Municipal Board of Cabanatuan City v. Samahang Magsasaka, Inc., 62 SCRA 435
[1975]). There are two kinds of compromise agreements, the judicial, which puts an end to a pending litigation, and the
extrajudicial, which is to avoid a litigation (Civil Code of the Philippines, Art. 2028; Caguioa, VI Commentaries and
Cases, on Civil Law 292 [1970]).

As a contract, a compromise agreement is perfected by mutual consent (Rovero v. Amparo, 91 Phil. 228 [1952]). A
judicial compromise, however, while binding between the parties upon its execution, is not executory until it is
approved by the court and reduced to a judgment.

Article 2037 of the Civil Code of the Philippines provides:

A compromise has upon the parties the effect and authority of res judicata; but there shall be no
execution except in compliance with a judicial compromise.

The non-fulfillment of the terms and conditions of a compromise agreement approved by the court justifies execution
thereof and the issuance of the writ for said purpose is the court's ministerial duty enforceable by mandamus (Maceda,
Jr. v. Moreman Builders Co., Inc., 203 SCRA 293 [1991]).

In the compromise agreement, petitioners obligated themselves to pay private respondents the amount of P50,000.00
on January 31, 1990, P10,000.00 on February 28, 1990, and P10,000.00 on March 31, 1990.

Petitioners received a copy of the decision of the Metropolitan Trial Court approving the compromise agreement on
March 26, 1990. Clearly, there was a breach, for it was only on August 17, 1990 that petitioners attempted to pay by
means of nine postdated checks the amounts agreed upon. In effect, the first installment payment of P50,000.00 due on
January 31, 1990 was moved to August 31, 1990, the second installment of P10,000.00 due on February 28, 1990 was
moved to September 30, 1990 and so forth, thereby making the last installment of P5,000.00 due on September 30, 1990
moved to April 30, 1991. This is tantamount to novating the original agreement entered into by the parties without the
consent of private respondents.

Inasmuch as a judicial compromise becomes binding between the parties upon its execution, petitioners should have
paid the installments falling due even before the approval thereof by the trial court. But assuming that a judicial
compromise is not perfected until it is approved by the court, still petitioner should have paid the compromise
agreement installments due on March 31, 1990, together with the installments due on January 31 and February 28, 1990
on or before March 31, 1990.

Petitioners also assail the validity of the issuance by the Deputy Sheriff of the notice to voluntarily vacate the premises
by way of enforcing the decision approving the compromise agreement. They maintain that their obligation is monetary
in nature and the applicable rule should have been Section 15, Rule 39 and not Section 13, Rule 39 of the Revised Rules
of Court.

Petitioners contention has merit.

When the parties entered into a compromise agreement, the original action for ejectment was set aside and the action
was changed to a monetary obligation.

A perusal of the compromise agreement signed by the parties and approved by the inferior court merely provided that
in case the defendants (petitioners herein) failed to pay three monthly installments, the plaintiffs (private respondents
herein) would be entitled to a writ of execution, without specifying what the subject of execution would be. Said
agreement did not state that petitioners would be evicted from the premises subject of the suit in case of any default in
complying with their obligation thereunder. This was the result of the careless drafting thereof for which only private
respondents were to be blamed.

A judgment is the foundation of a writ of execution which draws its vitality therefrom (Monaghon v. Monaghon, 25 Ohio
St. 325). An officer issuing a writ of execution is required to look to the judgment for his immediate authority (Sydnor v.
Roberts, 12 Tex. 598).

An execution must conform to and be warranted by the judgment on which it was issued (Francisco, The Revised Rules
of Court 641 [1966]; Kramer v. Montgomery, 206 Okla.190, 242 p. 2d 414 [1952]). There should not be a substantial
variance between the judgment and the writ of execution (Avery v. Lewis, 10 Vt. 332). Thus, an execution is fatally
defective if the judgment was for a sum of money and the writ of execution was for the sale of mortgaged property
(Bank of Philippine Islands v. Green, 48 Phil. 284 [1925]).

As petitioners' obligation under the compromise agreement as approved by the court was monetary in nature, private
respondents can avail only of the writ of execution provided in Section 15, Rule 39 of the Revised Rules of Court, and
not that provided in Section 13.

Section 15, Rule 39 provides:

Execution of money judgments. — The officer must enforce an execution of a money judgment by
levying on all the property, real and personal of every name and nature whatsoever, and which
may be disposed of for value, of the judgment debtor not exempt from execution, or on a
sufficient amount of such property, if there be sufficient, and selling the same, and paying to the
judgment creditor, or his attorney, so much of the proceeds as will satisfy the judgment. Any
excess in the proceeds over the judgment and accruing costs must be delivered to the judgment
debtor, unless otherwise directed by the judgment or order of the court. When there is more
property of the judgment debtor than is sufficient to satisfy the judgment and accruing costs,
 within the view of the officer, he must levy only on such part of the property as is amply sufficient
to satisfy the judgment and costs.

Real property, stocks, shares, debts, credits, and other personal property, or any interest in either
real or personal property, may be levied on in like manner and with like effect as under a writ of
attachment.

On the other hand, Section 13, Rule 39 provides:

How execution for the delivery or restitution of property enforced. — The officer must enforce an
execution for the delivery or restitution of property by ousting therefrom the person against whom
the judgment is rendered and placing the judgment creditor in possession of such property, and
by levying as hereinafter provided upon so much of the property of the judgment debtor as will
satisfy the amount of the judgment and costs included in the writ of execution.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the Sheriff is directed to
enforce the execution only of the money judgment in accordance with Section 15, Rule 39 of the Revised Rules of
Court.

SO ORDERED.

Padilla, Davide, Jr., Bellosillo and Kapunan, JJ., concur.

The Lawphil Project - Arellano Law Foundation

FIRST DIVISION

PHILIPPINE JOURNALISTS, G.R. No. 166421

INC., BOBBY DELA CRUZ,
ARNOLD BANARES and
ATTY. RUBY RUIZ BRUNO,
Petitioners, Present:
PANGANIBAN, C.J., Chairperson,
- versus - YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.
NATIONAL LABOR RELATIONS
COMMISSION, HON. COMMS.
LOURDES JAVIER, TITO
GENILO and ERNESTO Promulgated:
VERCELES, JOURNAL
EMPLOYEES UNION, and September 5, 2006
THE COURT OF APPEALS,
Respondents.
x--------------------------------------------------x

DECISION

CALLEJO, SR., J.:

This is a Petition for Certiorari under Rule 65[1] of the Rules of Court of the
Decision[2] of the Court of Appeals (CA) in CA-G.R. SP No. 81544, as well as the
Resolution[3] dated November 23, 2004 denying the motion for reconsideration
thereof.

The Antecedents

The Philippine Journalists, Inc. (PJI) is a domestic corporation engaged in the

publication and sale of newspapers and magazines. The exclusive bargaining agent
of all the rank-and-file employees in the company is the Journal Employees Union
(Union for brevity).

Sometime in April 2005, the Union filed a notice of strike before the National
Conciliation and Mediation Board (NCMB), claiming that PJI was guilty of unfair
labor practice. PJI was then going to implement a retrenchment program due to over-
staffing or bloated work force and continuing actual losses sustained by the company
for the past three years resulting in negative stockholders equity of P127.0 million.
The Secretary of the Department of Labor and Employment (DOLE) certified [4] the
labor dispute to the National Labor Relations Commission (NLRC) for compulsory
arbitration pursuant to Article 263 (g) of the Labor Code. The case was docketed as
NCMB-NCR-NS-03-087-00.

The parties were required to submit their respective position papers. PJI filed a
motion to dismiss, contending that the Secretary of Labor had no jurisdiction to
assume over the case and thus erred in certifying it to the Commission. The NLRC
denied the motion. PJI, thereafter, filed a Motion to Defer Further Proceedings,
alleging, among others, that the filing of its position paper might jeopardize attempts
to settle the matter extrajudicially, which the NLRC also denied. The case was,
thereafter, submitted for decision.[5]

In its Resolution[6] dated May 31, 2001, the NLRC declared that the 31 complainants
were illegally dismissed and that there was no basis for the implementation of
petitioners retrenchment program. The NLRC noted that the following
circumstances belied PJIs claim that it had incurred losses: (1) office renovations
were made as evidenced by numerous purchase orders; (2) certain employees were
granted merit increases; and (3) a Christmas party for employees was held at a plush
hotel. It also observed that PJIs executives refused to forego their quarterly bonuses
if the Union members refused to forego theirs.

Thus, the NLRC declared that the retrenchment of 31 employees was illegal
and ordered their reinstatement to their former position without loss of seniority
rights and other benefits, with payment of unpaid salaries, bonuses and backwages
from the date of dismissal up to the actual date of reinstatement plus 10% of the total
monetary award as attorneys fees. PJI was adjudged liable in the total amount
of P6,447,008.57.[7]

Thereafter, the parties executed a Compromise Agreement[8] dated July 9,

2001, where PJI undertook to reinstate the 31 complainant-employees effective July
1, 2001 without loss of seniority rights and benefits; 17 of them who were previously
retrenched were agreed to be given full and complete payment of their respective
monetary claims, while 14 others would be paid their monetary claims minus what
they received by way of separation pay. The agreement stated that the parties entered
the agreement [i]n a sincere effort at peace and reconciliation as well as to jointly
establish a new era in labor management relations marked by mutual trust,
cooperation and assistance, enhanced by open, constant and sincere communication
with a view of advancing the interest of both the company and its employees. The
compromise agreement was submitted to the NLRC for approval. All the employees
mentioned in the agreement and in the NLRC Resolution affixed their signatures
thereon. They likewise signed the Joint Manifesto and Declaration of Mutual
Support and Cooperation[9] which had also been submitted for the consideration of
the labor tribunal.
 The NLRC forthwith issued another Resolution[10] on July 25, 2002, declaring
that the Clarificatory Motion of complainants Floro Andrin, Jr. and Jazen M. Jilhani
had been mooted by the compromise agreement as they appeared to be included in
paragraph 2.c and paragraph 2.d, respectively thereof. As to the seven others who
had filed a motion for clarification, the NLRC held that they should have filed
individual affidavits to establish their claims or moved to consolidate their cases
with the certified case. Thus, the NLRC granted the computation of their benefits as
shown in the individual affidavits of the complainants. However, as to the prayer to
declare the Union guilty of unfair labor practice, to continue with the CBA
negotiation and to pay moral and exemplary damages, the NLRC ruled that there
was no sufficient factual and legal basis to modify its resolution. Thus, the
compromise agreement was approved and NCMB-NCR-NS-03-087-00 was deemed
closed and terminated.[11]

In the meantime, however, the Union filed another Notice of Strike on July 1,
2002, premised on the following claims:

1. OUTRIGHT DISMISSAL OF 29 EMPLOYEES

2. VIOLATION OF CBA BENEFITS
3. NON-PAYMENT OF ALLOWANCES, MEAL, RICE,
TRANSPORTATION, QUARTERLY BONUS, X-MAS BONUS,
ANNIVERSARY BONUS, HEALTH INSURANCE, DENTAL TO 29
EMPLOYEES
4. NON-PAYMENT OF BACKWAGES OF 38 REINSTATED
EMPLOYEES [JUNE 2001 SALARY AND ALLOWANCES,
DIFFERENCE (sic) OF ALLOWANCES AND BONUSES AWARDED
BY NLRC]
5. TRANSPORTATION ALLOWANCE OF 5 UNION
MEMBERS

6. NON-PAYMENT OF P1000 INCREASE PER CBA

7. DIMINUTION OF SALARY OF 200 EMPLOYEES TO 50%[12]

In an Order[13] dated September 16, 2002, the DOLE Secretary certified the
case to the Commission for compulsory arbitration. The case was docketed as
NCMB-NCR-NS-07-251-02.
 The Union claimed that 29 employees were illegally dismissed from
employment, and that the salaries and benefits[14] of 50 others had been illegally
reduced.[15] After the retrenchment program was implemented, 200 Union members-
employees who continued working for petitioner had been made to sign five-month
contracts. The Union also alleged that the company, through its legal officer,
threatened to dismiss some 200 union members from employment if they refused to
conform to a 40% to 50% salary reduction; indeed, the 29 employees who refused
to accede to these demands were dismissed on June 28, 2002. The Union prayed that
the dismissed employees be reinstated with payment of full backwages and all other
benefits or their monetary equivalent from the date of their dismissal on July 3, 2002
up to the actual date of reinstatement; and that the CBA benefits (as of November
2002) of the 29 employees and 50 others be restored.

In its Resolution[16] dated July 31, 2003, the NLRC ruled that the
complainants were not illegally dismissed. The May 31, 2001 Resolution declaring
the retrenchment program illegal did not attain finality as it had been academically
mooted by the compromise agreement entered into between both parties on July 9,
2001. According to the Commission, it was on the basis of this agreement that the
July 25, 2002 Resolution which declared the case closed and terminated was issued.
Pursuant to Article 223 of the Labor Code, this later resolution attained finality upon
the expiration of ten days from both parties receipt thereof. Thus, the May 31,
2001 Resolution could not be made the basis to justify the alleged continued
employment regularity of the 29 complainants subsequent to their retrenchment. The
NLRC further declared that the two cases involved different sets of facts, hence, the
inapplicability of the doctrine of stare decisis. In the first action, the issue was
whether the complainants as regular employees were illegally retrenched; in this
case, whether the 29 complainants, contractual employees, were illegally dismissed
on separate dates long after their retrenchment.

The NLRC also declared that by their separate acts of entering into fixed-term
employment contracts with petitioner after their separation from employment by
virtue of retrenchment, they are deemed to have admitted the validity of their
separation from employment and are thus estopped from questioning it. Moreover,
there was no showing that the complainants were forced or pressured into signing
the fixed-term employment contracts which they entered into. Consequently, their
claims for CBA benefits and increases from January to November 2002 should be
dismissed. The NLRC pointed out that since they were mere contractual employees,
the complainants were necessarily excluded from the collective bargaining unit. The
NLRC stressed that the complainants had refused to be regularized and ceased to be
employees of petitioner upon the expiration of their last fixed-term employment
contracts. Thus, the NLRC dismissed the case for lack of merit, but directed the
company to give preference to the separated 29 complainants should they apply for
re-employment.

On the other issues raised by the complainants, the NLRC held:

We, furthermore find that JEU has no personality to represent the 29

Complainants for, as prudently discussed above, they were contractual
employees, not regular employees, from the time they entered into fixed-
term employment contracts after being retrenched up to the time they
ceased being employees of PJI due to the non-renewal of their last fixed-
term employment contracts. As contractual employees, they were
excluded from the Collective Bargaining Unit (Section 2, CBA) and
hence, not union members.

Complainants contend that PJI admitted that the 29 Complainants were

union members because PJI deducted union dues from their monthly
wages.

We, however, do not subscribe to this view.

Firstly, although PJI deducted union dues from the monthly wages of the
29 employees, it erroneously did so due to the distracting
misrepresentation of JEU that they were union members. Thus, if there is
any legal effect of these acts of misrepresentation and erroneous
deduction, it is certainly the liability of JEU for restitution of the
erroneously deducted amounts to PJI.

Secondly, the union membership admission due to erroneous union dues

deduction is incompatible with the fixed-term employment contracts
Complainants entered into with PJI.

We finally rule that JEU is not guilty of unfair labor practice. Although it
admitted the 29 contractual employees as its members and represented
them in the instant case and circulated derogatory letters and made
accusations against Respondents, it is, nevertheless, deemed to have acted
 in good faith, there being no substantial evidence on record showing that
they did so in bad faith and with malice.

Much as we empathize with Complainants in their period of depressing

economic plight and hence, sincerely yearn to extricate them from them
such a situation, [w]e cannot do anything, for our hands are shackled by
the hard but true merits of the instant case. As an exception to this
incapacity, however, [w]e can request Respondents to give preference to
the 29 Complainants should they apply for re-employment.[17]

The Union assailed the ruling of the NLRC before the CA via petition
for certiorari under Rule 65.

In its Decision dated August 17, 2004, the appellate court held that the NLRC
gravely abused its discretion in ruling for PJI. The compromise agreement referred
only to the award given by the NLRC to the complainants in the said case, that is, the
obligation of the employer to the complainants. The CA pointed out that the NLRC
Resolution nevertheless declared that respondent failed to prove the validity of its
retrenchment program, which according to it, stands even after the compromise
agreement was executed; it was the reason why the agreement was reached in the
first place.

The CA further held that the act of respondent in hiring the retrenched
employees as contractual workers was a ploy to circumvent the latters security of
tenure. This is evidenced by the admission of PJI, that it hired contractual employees
(majority of whom were those retrenched) because of increased, albeit uncertain,
demand for its publications. The CA pointed out that this was done almost
immediately after implementing the retrenchment program. Another telling feature
is the fact that the said employees were re-hired for five-month contracts only, and
were later offered regular employment with salaries lower than what they were
previously receiving. The CA also ruled that the dismissed employees were not
barred from pursuing their monetary claims despite the fact that they had accepted
their separation pay and signed their quitclaims. The dispositive portion of the
decision reads:

WHEREFORE, the petition is GRANTED. Respondent is ordered to

reinstate the 29 dismissed employees to their previous positions without
 loss of seniority rights and payment of their full backwages from the time
of their dismissal up to their actual reinstatement. Respondent is likewise
ordered to pay the 29 and 50 employees, respectively, their rightful
benefits under the CBA, less whatever amount they have already
received. The records of this case are remanded to the NLRC for the
computation of the monetary awards.

SO ORDERED.[18]

The Present Petition

PJI, its President Bobby Dela Cruz, its Executive Vice-President Arnold
Banares, and its Chief Legal Officer Ruby Ruiz Bruno, the petitioners, now come
before this Court and submit that the CA erred as follows:
I

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE

ABUSE OF DISCRETION WHEN IT ADOPTED THE RESOLUTION
DATED 31 MAY 2001 IN CERT. CASE NO. 000181-
00 AND APPLIED THE SAME TO THE INSTANT CASE DOCKETED
AS CERT. CASE NO. 000229-02, DESPITE THE SAID RESOLUTION
BEING ABANDONED ANDACADEMICALLY MOOTED BY THE
RESOLUTION DATED 25 JULY 2001, WHICH APPROVED THE

COMPROMISE AGREEMENT BETWEEN THE PARTIES IN CERT.

CASE NO. 000181-00. IN FINE; THE HONORABLE COURT OF
APPEALS APPLIED TO THE INSTANT CASE THE
LOGIC AND LAW OF AN ABANDONED RESOLUTION WHICH
NEVER ATTAINED FINALITY.

II

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE

ABUSE OF DISCRETION WHEN IT TRIED
FACTS AND EVIDENCES WHICH WERE NOT
PRESENTED ANDCONSIDERED BY THE COURT A QUO. IN
FINE, THE HONORABLE COURT OF APPEALS WENT
BEYOND ITS MANDATE AND AUTHORITY WHEN IT
BECAME A TRIER OF FACTS.
 III

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE

ABUSE OF DISCRETION WHEN IT GRANTED TO AWARD 50
OTHER PERSONS WHO ARE NOT PARTIES OR PRIVIES TO THE
INSTANT CASE. IN FINE, THE HONORABLE COURT OF
APPEALS GRANTED AWARDS TO THOSE WITH WHOM IT
NEVER HAD JURISDICTION.[19]

At the outset, we note that this case was brought before us via petition
for certiorari under Rule 65 of the Revised Rules of Civil Procedure. The proper
remedy, however, was to file a petition under Rule 45. It must be stressed
that certiorari under Rule 65 is a remedy narrow in scope and inflexible in character.
It is not a general utility tool in the legal workshop.[20] Moreover, the special civil
action for certiorari will lie only when a court has acted without or in excess of
jurisdiction or with grave abuse of discretion.[21]

Be that as it may, a petition for certiorari may be treated as a petition for

review under Rule 45. Such move is in accordance with the liberal spirit pervading
the Rules of Court and in the interest of substantial justice.[22] As the instant petition
was filed within the prescribed fifteen-day period, and in view of the substantial
issues raised, the Court resolves to give due course to the petition and treat the same
as a petition for review on certiorari.[23]

The primary issue before the Court is whether an NLRC Resolution, which
includes a pronouncement that the members of a union had been illegally dismissed,
is abandoned or rendered moot and academic by a compromise agreement
subsequently entered into between the dismissed employees and the employer; this,
in turn, raises the question of whether such a compromise agreement constitutes res
judicata to a new complaint later filed by other union members-employees, not
parties to the agreement, who likewise claim to have been illegally dismissed.

Petitioners point out that a compromise agreement is the product of free will
and consent of the parties and that such agreement can be entered into during any
stage of the case. They insist that its terms are not dictated or dependent on the courts
findings of facts; it is valid as long as not contrary to law, public order, public policy,
morals or good customs. According to petitioners, the execution of the compromise
agreement embodied and approved by the NLRC Resolution dated July 25,
2001 effectively closed and terminated Certified Case No. 000181-00.
Citing Golden Donuts, Inc., v. National Labor Relations Commission.[24] Thus, a
judgment on a compromise agreement has the force and effect of any other
judgment.

Petitioners also point out that as correctly observed by the NLRC, the
resolution declaring respondents retrenchment was promulgated on May 31, 2001.
Petitioners side was never presented in Certified Case No. 000181-00, and if it were
not for the filing of the compromise agreement, they would have moved to
reconsider or at least filed the appropriate pleadings to rectify the findings adverse
to them. They insist that the compromise agreement effectively abandoned all
findings of facts and its necessary consequences in favor of the amicable settlement.
The compromise agreement was thereafter

approved on July 25, 2001 by the NLRC. As clearly stated in Article 223 of the
Labor Code, it is the Resolution dated July 25, 2001 that attained finality after the
expiration of the ten-day period, and not the abandoned and mooted Resolution
dated May 31, 2001.

Petitioners claim that the letter of Atty. Adolfo Romero dated March 20,
2000 was never presented as evidence. Moreover, since the CA is not a trier of facts,
it was error on its part to admit material evidence that was never presented in the
instant case (or to lift findings of facts from the abandoned and mooted resolution
dated 31 May 2001). Thus, the NLRC did not act with grave abuse of discretion
when it found that the retrenchment was legal as stated in the appealed decision
dated July 31, 2003. Such use of the admissions contained in the said letter
dated March 20, 2000 denied them due process as they were not given the
opportunity to contest or deny its validity or existence.

Petitioners further point out that while the instant petition was filed only by
29 complainants, the dispositive portion of the assailed decision was extended to
cover 50 other persons. They insist that the said letter, as well as the findings of a
mooted decision, were used as evidence to support the erroneous decision of the CA;
in so doing, the appellate court acted with grave abuse of discretion amounting to
lack or excess of jurisdiction.

For their part, private respondents claim that the appellate court did not
commit any reversible error, and that the assailed decision is borne out by the
evidence on record. Since the dismissal of the retrenched employees has been
declared illegal, the 29 dismissed employees enjoy the status of regular and
permanent employees who cannot be dismissed except for cause; hence, the CA
correctly ordered their reinstatement.

They further point out that the fixing of five-month contracts of employment
entered into by the individual union members was intentionally employed by
petitioners to circumvent the provisions of the Labor Code on security of tenure,
hence, illegal. They also allege that petitioners did not comply with the 30-day notice
rule required by law to render any dismissal from employment valid. The letter of
dismissal was dated June 27, 2002, and took effect a week after, or on July 3, 2002,
a violation of the 30-day notice rule. The Union members salaries and benefits were
obtained through CBA negotiations and were included in the existing CBA. Thus,
petitioners act of unilaterally removing such benefits and wage increases constitutes
gross violations of its economic provisions, and unfair labor practice as defined by
the Labor Code. Private respondents cite Philippine Carpet Employees Association
v. Philippine Carpet Manufacturing Corporation[25] to support their arguments.
They insist that the illegally retrenched employees were made to believe that their
retrenchment was valid, and thus, through mistake or fraud accepted their separation
pay, which, however, does not militate against their claims.

The Ruling of the Court

The petition is denied.

The nature of a compromise is spelled out in Article 2028 of the New Civil
Code: it is a contract whereby the parties, by making reciprocal concessions, avoid
litigation or put an end to one already commenced. Parties to a compromise are
motivated by the hope of gaining, balanced by the dangers of losing. [26] It
contemplates mutual concessions and mutual gains to avoid the expenses of
litigation, or, when litigation has already begun, to end it because of the uncertainty
of the result.[27] Article 227 of the Labor Code of the Philippines authorizes
compromise agreements voluntarily agreed upon by the parties, in conformity with
the basic policy of the State to promote and emphasize the primacy of free collective
bargaining and negotiations, including voluntary arbitration, mediation and
conciliation, as modes of settling labor or industrial disputes.[28] As the Court

held in Reformist Union of R.B. Liner, Inc. v. NLRC,[29] the provision bestows
finality to unvitiated compromise agreements, particularly if there is no allegation
that either party did not comply with what was incumbent upon them under the
agreement. The provision reads:

ART. 227 Compromise Agreements. Any compromise settlement,

including those involving labor standard laws, voluntarily agreed upon by
the parties with the assistance of the Bureau or the regional office of the
Department of Labor, shall be final and binding upon the parties. The
National Labor Relations Commission or any court shall not assume
jurisdiction over issues involved therein except in case of noncompliance
thereof or if there is prima facie evidence that the settlement was obtained
through fraud, misrepresentation, or coercion.

Thus, a judgment rendered in accordance with a compromise agreement is not

appealable, and is immediately executory unless a motion is filed to set aside the
agreement on the ground of fraud, mistake, or duress, in which case an appeal may
be taken against the order denying the motion.[30] Under Article 2037 of the Civil
Code, a compromise has upon the parties the effect and authority of res judicata,
even when effected without judicial approval; and under the principle of res
judicata, an issue which had already been laid to rest by the parties themselves can
no longer be relitigated.[31]

In AFP Mutual Benefit Association, Inc. v. Court of Appeals,[32] the Court

spelled out the distinguishing features of a compromise agreement that is basically
intended to resolve a matter already in litigation, or what is normally termed as a
judicial compromise. The Court held that once approved, the agreement becomes
more than a mere contract binding upon the parties, considering that it has been
entered as the courts determination of the controversy and has the force and effect
of any other judgment. The Court went on to state:

Adjective law governing judicial compromises annunciate that

once approved by the court, a judicial compromise is not appealable and
it thereby becomes immediately executory but this rule must be
understood to refer and apply only to those who are bound by the
compromise and, on the assumption that they are the only parties to the
case, the litigation comes to an end except only as regards to its
compliance and the fulfillment by the parties of their respective
obligations thereunder. The reason for the rule, said the Court in Domingo
v. Court of Appeals [325 Phil. 469], is that when both parties so enter into
the agreement to put a close to a pending litigation between them and
ask that a decision be rendered in conformity therewith, it would only be
natural to presume that such action constitutes an implicit waiver of the
right to appeal against that decision. The order approving the
compromise agreement thus becomes a final act, and it forms part and
parcel of the judgment that can be enforced by a writ of execution unless
otherwise enjoined by a restraining order.[33]

Thus, contrary to the allegation of petitioners, the execution and subsequent

approval by the NLRC of the agreement forged between it and the
respondent Union did not render the NLRC resolution ineffectual, nor rendered it
moot and academic. The agreement becomes part of the judgment of the court or
tribunal, and as a logical consequence, there is an implicit waiver of the right to
appeal.

In any event, the compromise agreement cannot bind a party who did not
voluntarily take part in the settlement itself and gave specific individual
consent.[34] It must be remembered that a compromise agreement is also a contract;
it requires the consent of the parties, and it is only then that the agreement may be
considered as voluntarily entered into.

The case of Golden Donuts, Inc. v. National Labor Relations

Commission,[35] which petitioners erroneously rely upon, is instructive on this point.
The Court therein was confronted with the following questions:
 x x x (1) whether or not a union may compromise or waive the
rights to security of tenure and money claims of its minority members,
without the latters consent, and (2) whether or not the compromise
agreement entered into by the union with petitioner company, which has
not been consented to nor ratified by respondents minority members has
the effect of res judicata upon them.[36]

Speaking through Justice Reynato C. Puno, the Court held that pursuant to
Section 23, Rule 138[37] of the then 1964 Revised Rules of Court, a special authority
is required before a lawyer may compromise his clients litigation; thus, the union
has no authority to compromise the individual claims of members who did not
consent to the settlement.[38] The Court also stated that the authority to compromise
cannot lightly be presumed and should be duly established by evidence, [39] and that
a compromise agreement is not valid when a party in the case has not signed the
same or when someone signs for and in behalf of such party without authority to do
so; consequently, the affected employees may still pursue their individual claims
against their employer.[40] The Court went on to state that a judgment approving a
compromise agreement cannot have the effect of res judicata upon non-signatories
since the requirement of identity of parties is not satisfied. A judgment upon a
compromise agreement has all the force and effect of any other judgment, and,
conclusive only upon parties thereto and their privies, hence, not binding on third
persons who are not parties to it.[41]

A careful perusal of the wordings of the compromise agreement will show

that the parties agreed that the only issue to be resolved was the question of the
monetary claim of several employees. The prayer of the parties in the compromise
agreement which was submitted to the NLRC reads:

WHEREFORE, premises considered, it is respectfully prayed that

the Compromise Settlement be noted and considered; that the instant case
[be] deemed close[d] and terminated and that the Decision dated May 31,
2001 rendered herein by this Honorable Commission be deemed to be
fully implemented insofar as concerns the thirty-one (31) employees
mentioned in paragraphs 2c and 2d hereof; and, that the only issue
remaining to be resolved be limited to the question of the monetary claim
raised in the motion for clarification by the seven employees mentioned in
paragraph 2e hereof.[42]
 The agreement was later approved by the NLRC. The case was considered
closed and terminated and the Resolution dated May 31, 2001 fully implemented
insofar as the employees mentioned in paragraphs 2c and 2d of the compromise
agreement were concerned. Hence, the CA was correct in holding that the
compromise agreement pertained only to the monetary obligation of the employer
to the dismissed employees, and in no way affected the Resolution in NCMB-NCR-
NS-03-087-00 dated May 31, 2001 where the NLRC made the pronouncement
that there was no basis for the implementation of petitioners retrenchment program.

To reiterate, the rule is that when judgment is rendered based on a compromise

agreement, the judgment becomes immediately executory, there being an implied
waiver of the parties right to appeal from the decision.[43] The judgment having
become final, the Court can no longer reverse, much less modify it.

Petitioners argument that the CA is not a trier of facts is likewise erroneous. In the
exercise of its power to review decisions by the NLRC, the CA can review the factual
findings or legal conclusions of the labor tribunal.[44] Thus, the CA is not proscribed
from examining evidence anew to determine whether the factual findings of the
NLRC are supported by the evidence presented and the conclusions derived
therefrom accurately ascertained.[45]

The findings of the appellate court are in accord with the evidence on record,
and we note with approval the following pronouncement:

Respondents alleged that it hired contractual employees majority of whom

were those retrenched because of the increased but uncertain demand for
its publications. Respondent did this almost immediately after its alleged
retrenchment program. Another telling feature in the scheme of
respondent is the fact that these contractual employees were given
contracts of five (5) month durations and thereafter, were offered regular
employment with salaries lower than their previous salaries. The Labor
Code explicitly prohibits the diminution of employees benefits. Clearly,
the situation in the case at bar is one of the things the provision on security
of tenure seeks to prevent.

Lastly, it could not be said that the employees in this case are barred from
pursuing their claims because of their acceptance of separation pay and
their signing of quitclaims. It is settled that quitclaims, waivers and/or
 complete releases executed by employees do not stop them from pursuing
their claims if there is a showing of undue pressure or duress. The basic
reason for this is that such quitclaims, waivers and/or complete releases
being figuratively exacted through the barrel of a gun, are against public
policy and therefore null and void ab initio (ACD Investigation Security
Agency, Inc. v. Pablo D. Daquera, G.R. No. 147473, March 30, 2004). In
the case at bar, the employees were faced with impending termination. As
such, it was but natural for them to accept whatever monetary benefits that
they could get.[46]

CONSIDERING THE FOREGOING, the petition is DENIED and the assailed

Decision and Resolution AFFIRMED. Costs against the petitioners.

SO ORDERED.

ROMEO J. CALLEJO, SR.

Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson

CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice Associate Justice

MINITA V. CHICO-NAZARIO
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above decision had been reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
ARTEMIO V. PANGANIBAN
Chief Justice

Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION

CRISANTA ALCARAZ MIGUEL, G.R. No. 191336

Petitioner,
Present:

CARPIO, J.,
- versus - Chairperson,
PEREZ,
SERENO,
REYES, and
PERLAS-BERNABE, JJ. 

JERRY D. MONTANEZ, Promulgated:

Respondent.
January 25, 2012

x------------------------------------------------------------------------------------x

DECISION

REYES, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules
of Court. Petitioner Crisanta Alcaraz Miguel (Miguel) seeks the reversal and setting
aside of the September 17, 2009 Decision[1] and February 11, 2010 Resolution[2] of
the Court of Appeals (CA) in CA-G.R. SP No. 100544, entitled Jerry D. Montanez
v. Crisanta Alcaraz Miguel.

Antecedent Facts

On February 1, 2001, respondent Jerry Montanez (Montanez) secured a loan of One

Hundred Forty-Three Thousand Eight Hundred Sixty-Four Pesos (P143,864.00),
payable in one (1) year, or until February 1, 2002, from the petitioner. The
respondent gave as collateral therefor his house and lot located at Block 39 Lot 39
Phase 3, Palmera Spring, Bagumbong, Caloocan City.

Due to the respondents failure to pay the loan, the petitioner filed a complaint
against the respondent before the Lupong Tagapamayapa of Barangay San Jose,
Rodriguez, Rizal. The parties entered into a Kasunduang Pag-aayos wherein the
respondent agreed to pay his loan in installments in the amount of Two Thousand
Pesos (P2,000.00) per month, and in the event the house and lot given as collateral
is sold, the respondent would settle the balance of the loan in full. However, the
respondent still failed to pay, and on December 13, 2004, the Lupong
Tagapamayapa issued a certification to file action in court in favor of the petitioner.

On April 7, 2005, the petitioner filed before the Metropolitan Trial Court
(MeTC) of Makati City, Branch 66, a complaint for Collection of Sum of Money. In
his Answer with Counterclaim,[3] the respondent raised the defense of improper
venue considering that the petitioner was a resident of
Bagumbong, Caloocan City while he lived in San Mateo, Rizal.

After trial, on August 16, 2006, the MeTC rendered a Decision, [4] which
disposes as follows:

WHEREFORE, premises considered[,] judgment is hereby rendered ordering

defendant Jerry D. Montanez to pay plaintiff the following:
 1. The amount of [Php147,893.00] representing the obligation with
legal rate of interest from February 1, 2002 which was the date
of the loan maturity until the account is fully paid;

2. The amount of Php10,000.00 as and by way of attorneys fees; and

the costs.

SO ORDERED. [5]

On appeal to the Regional Trial Court (RTC) of Makati City, Branch 146, the
respondent raised the same issues cited in his Answer. In its March 14, 2007
Decision,[6] the RTC affirmed the MeTC Decision, disposing as follows:

WHEREFORE, finding no cogent reason to disturb the findings of the

court a quo, the appeal is hereby DISMISSED, and the DECISION appealed from
is hereby AFFIRMED in its entirety for being in accordance with law and evidence.

SO ORDERED.[7]

Dissatisfied, the respondent appealed to the CA raising two issues, namely,

(1) whether or not venue was improperly laid, and (2) whether or not
the Kasunduang Pag-aayos effectively novated the loan agreement. On September
17, 2009, the CA rendered the assailed Decision, disposing as follows:

WHEREFORE, premises considered, the petition is hereby GRANTED.

The appealed Decision dated March 14, 2007 of the Regional Trial Court (RTC)
of Makati City, Branch 146, is REVERSED and SET ASIDE. A new judgment is
entered dismissing respondents complaint for collection of sum of money, without
prejudice to her right to file the necessary action to enforce the Kasunduang Pag-
aayos.

SO ORDERED.[8]

Anent the issue of whether or not there is novation of the loan

contract, the CA ruled in the negative. It ratiocinated as follows:

Judging from the terms of the Kasunduang Pag-aayos, it is clear that no

novation of the old obligation has taken place. Contrary to petitioners assertion,
there was no reduction of the term or period originally stipulated. The original
 period in the first agreement is one (1) year to be counted from February 1, 2001,
or until January 31, 2002. When the complaint was filed before the barangay on
February 2003, the period of the original agreement had long expired without
compliance on the part of petitioner. Hence, there was nothing to reduce or extend.
There was only a change in the terms of payment which is not incompatible with
the old agreement. In other words, the Kasunduang Pag-aayos merely
supplemented the old agreement.[9]

The CA went on saying that since the parties entered into a Kasunduang Pag-
aayos before the Lupon ng Barangay, such settlement has the force and effect of a
court judgment, which may be enforced by execution within six (6) months from the
date of settlement by the Lupon ng Barangay, or by court action after the lapse of
such time.[10]Considering that more than six (6) months had elapsed from the date of
settlement, the CA ruled that the remedy of the petitioner was to file an action for
the execution of the Kasunduang Pag-aayos in court and not for collection of sum
of money.[11] Consequently, the CA deemed it unnecessary to resolve the issue on
venue.[12]

The petitioner now comes to this Court.

Issues

(1) Whether or not a complaint for sum of money is the proper remedy for the
petitioner, notwithstanding the Kasunduang Pag-aayos;[13] and

(2) Whether or not the CA should have decided the case on the merits
rather than remand the case for the enforcement of the Kasunduang Pag-aayos.[14]

Our Ruling

Because the respondent failed to comply

with the terms of the Kasunduang Pag-
aayos, said agreement is deemed rescinded
pursuant to Article 2041 of the New Civil
Code and the petitioner can insist on his
original demand. Perforce, the complaint
for collection of sum of money is the
proper remedy.

The petitioner contends that the CA erred in ruling that she should have
followed the procedure for enforcement of the amicable settlement as provided in
the Revised Katarungang Pambarangay Law, instead of filing a collection case. The
petitioner points out that the cause of action did not arise from the Kasunduang Pag-
aayos but on the respondents breach of the original loan agreement.[15]

This Court agrees with the petitioner.

It is true that an amicable settlement reached at the barangay conciliation

proceedings, like the Kasunduang Pag-aayos in this case, is binding between the
contracting parties and, upon its perfection, is immediately executory insofar as it is
not contrary to law, good morals, good
[16]
customs, public order and public policy. This is in accord with the broad precept
of Article 2037 of the Civil Code, viz:

A compromise has upon the parties the effect and authority of res judicata;
but there shall be no execution except in compliance with a judicial compromise.

Being a by-product of mutual concessions and good faith of the parties, an

amicable settlement has the force and effect of res judicata even if not judicially
approved.[17] It transcends being a mere contract binding only upon the parties
thereto, and is akin to a judgment that is subject to execution in accordance with the
Rules.[18] Thus, under Section 417 of the Local Government Code,[19] such amicable
settlement or arbitration award may be enforced by execution by the Barangay
Lupon within six (6) months from the date of settlement, or by filing an action to
enforce such settlement in the appropriate city or municipal court, if beyond the six-
month period.

Under the first remedy, the proceedings are covered by the Local Government
Code and the Katarungang Pambarangay Implementing Rules and Regulations.
The Punong Barangay is called upon during the hearing to determine solely the fact
of non-compliance of the terms of the settlement and to give the defaulting party
another chance at voluntarily complying with his obligation under the settlement.
Under the second remedy, the proceedings are governed by the Rules of Court, as
amended. The cause of action is the amicable settlement itself, which, by operation
of law, has the force and effect of a final judgment.[20]

It must be emphasized, however, that enforcement by execution of the

amicable settlement, either under the first or the second remedy, is only applicable if
the contracting parties have not repudiated such settlement within ten (10) days from
the date thereof in accordance with Section 416 of the Local Government Code. If
the amicable settlement is repudiated by one party, either expressly or impliedly, the
other party has two options, namely, to enforce the compromise in accordance with
the Local Government Code or Rules of Court as the case may be, or to consider it
rescinded and insist upon his original demand. This is in accord with Article 2041 of
the Civil Code, which qualifies the broad application of Article 2037, viz:

If one of the parties fails or refuses to abide by the compromise, the other
party may either enforce the compromise or regard it as rescinded and insist upon
his original demand.

In the case of Leonor v. Sycip,[21] the Supreme Court (SC) had the occasion to
explain this provision of law. It ruled that Article 2041 does not require an action for
rescission, and the aggrieved party, by the breach of compromise agreement, may
just consider it already rescinded, to wit:

It is worthy of notice, in this connection, that, unlike Article 2039 of the

same Code, which speaks of "a cause of annulment or rescission of the
compromise" and provides that "the compromise may be annulled or rescinded"
for the cause therein specified, thus suggesting an action for annulment or
rescission, said Article 2041 confers upon the party concerned, not a "cause" for
rescission, or the right to "demand" the rescission of a compromise, but the
authority, not only to "regard it as
rescinded", but, also, to "insist upon his original demand". The language of this
Article 2041, particularly when contrasted with that of Article 2039, denotes
that no action for rescission is required in said Article 2041, and that the party
aggrieved by the breach of a compromise agreement may, if he chooses, bring
the suit contemplated or involved in his original demand, as if there had never
been any compromise agreement, without bringing an action for rescission
thereof. He need not seek a judicial declaration of rescission, for he may
 "regard" the compromise agreement already "rescinded".[22] (emphasis
supplied)

As so well stated in the case of Chavez v. Court of Appeals,[23] a party's non-

compliance with the amicable settlement paved the way for the application of Article
2041 under which the other party may either enforce the compromise, following the
procedure laid out in the Revised Katarungang Pambarangay Law, or consider it as
rescinded and insist upon his original demand. To quote:

In the case at bar, the Revised Katarungang Pambarangay Law provides for
a two-tiered mode of enforcement of an amicable settlement, to wit: (a) by
execution by the Punong Barangay which is quasi-judicial and summary in nature
on mere motion of the party entitled thereto; and (b) an action in regular form,
which remedy is judicial. However, the mode of enforcement does not rule out the
right of rescission under Art. 2041 of the Civil Code. The availability of the right
of rescission is apparent from the wording of Sec. 417 itself which provides that
the amicable settlement "may" be enforced by execution by the lupon within six (6)
months from its date or by action in the appropriate city or municipal court, if
beyond that period. The use of the word "may" clearly makes the procedure
provided in the Revised Katarungang Pambarangay Law directory or merely
optional in nature.

Thus, although the "Kasunduan" executed by petitioner and

respondent before the Office of the Barangay Captain had the force and effect
of a final judgment of a court, petitioner's non-compliance paved the way for
the application of Art. 2041 under which respondent may either enforce the
compromise, following the procedure laid out in the Revised Katarungang
Pambarangay Law, or regard it as rescinded and insist upon his original
demand. Respondent chose the latter option when he instituted Civil Case No.
5139-V-97 for recovery of unrealized profits and reimbursement of advance
rentals, moral and exemplary damages, and attorney's fees. Respondent was not
limited to claiming P150,000.00 because although he agreed to the amount in the
"Kasunduan," it is axiomatic that a compromise settlement is not an admission of
liability but merely a recognition that there is a dispute and an impending litigation
which the parties hope to prevent by making reciprocal concessions, adjusting their
respective positions in the hope of gaining balanced by the danger of losing. Under
the "Kasunduan," respondent was only required to execute a waiver of all possible
claims arising from the lease contract if petitioner fully complies with his
obligations thereunder. It is undisputed that herein petitioner did not.[24] (emphasis
supplied and citations omitted)
 In the instant case, the respondent did not comply with the terms and
conditions of the Kasunduang Pag-aayos. Such non-compliance may be construed
as repudiation because it denotes that the respondent did not intend to be bound by
the terms thereof, thereby negating the very purpose for which it was executed.
Perforce, the petitioner has the option either to enforce the Kasunduang Pag-
aayos, or to regard it as rescinded and insist upon his original demand, in accordance
with the provision of Article 2041 of the Civil Code. Having instituted an action for
collection of sum of money, the petitioner obviously chose to rescind
the Kasunduang Pag-aayos. As such, it is error on the part of the CA to rule that
enforcement by execution of said agreement is the appropriate remedy under the
circumstances.

Considering that the Kasunduang Pag-

aayos is deemed rescinded by the non-
compliance of the respondent of the terms
thereof, remanding the case to the trial
court for the enforcement of said
agreement is clearly unwarranted.

The petitioner avers that the CA erred in remanding the case to the
trial court for the enforcement of the Kasunduang Pag-aayos as it prolonged the
process, thereby putting off the case in an indefinite pendency.[25] Thus, the petitioner
insists that she should be allowed to ventilate her rights before this Court and not to
repeat the same proceedings just to comply with the enforcement of the Kasunduang
Pag-aayos, in order to finally enforce her right to payment.[26]

The CA took off on the wrong premise that enforcement of the Kasunduang
Pag-aayos is the proper remedy, and therefore erred in its conclusion that the case
should be remanded to the trial court. The fact that the petitioner opted to rescind
the Kasunduang Pag-aayos means that she is insisting upon the undertaking of the
respondent under the original loan contract. Thus, the CA should have decided the
case on the merits, as an appeal before it, and not prolong the determination of the
issues by remanding it to the trial court. Pertinently, evidence abounds that the
respondent has failed to comply with his loan obligation. In fact, the Kasunduang
Pag-aayos is the well nigh incontrovertible proof of the respondents indebtedness
with the petitioner as it was executed precisely to give the respondent a second
chance to make good on his undertaking. And since the respondent still reneged in
paying his indebtedness, justice demands that he must be held answerable therefor.

WHEREFORE, the petition is GRANTED. The assailed decision of the

Court of Appeals is SET ASIDE and the Decision of the Regional Trial Court,
Branch 146, Makati City, dated March 14, 2007 is REINSTATED.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice

JOSE PORTUGAL PEREZ MARIA LOURDES P. A. SERENO

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division
Chairperson's Attestation, I certify that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the opinion
of the Courts Division.

RENATO C. CORONA
Chief Justice


Additional Member in lieu of Associate Justice Arturo D. Brion per Special Order No. 1174 dated January 9, 2012.
[1]
Penned by Associate Justice Rosalinda Asuncion-Vicente, with Associate Justices Normandie B. Pizarro and
Ricardo R. Rosario, concurring; rollo, pp. 37-45.
[2]
Id. at 34-35.
[3]
Id. at 63-69.
[4]
Id. at 70-74.
[5]
Id. at 73.
[6]
Id. at 75-77.
[7]
Id. at 77.
[8]
Id. at 45.
[9]
Id. at 41.
[10]
Id. at 42.
[11]
Id. at 43.
[12]
Id. at 44.
[13]
Id. at 13.
[14]
Id. at 14.
[15]
Id. at 20.
[16]
New Civil Code, Article 1306.
[17]
Republic v. Sandiganbayan, G.R. No.108292, September 10, 1993,, 226 SCRA 314; 468 Phil 1000 (2004).
[18]
Manila International Airport Authority (MIAA) v. ALA Industries Corporation, G.R. No. 147349, February 13,
2004, 422 SCRA 603, 611.
[19]
R.A. No. 7160, Book III, Title One, Chapter VII, Section, 417. Execution. The amicable settlement or arbitration
award may be enforced by execution by the [L]upon within six (6) months from the date of the settlement. After the
lapse of such time, the settlement may be enforced by action in the proper city or municipal court.
[20]
Vidal v. Escueta, 463 Phil 314 (2003).
[21]
111 Phil 859 (1961).
[22]
Id. at 865.
[23]
493 Phil 945 (2005).
[24]
Id. at 954-955.
[25]
Rollo, p. 26.
[26]
Id. at 27.

G.R. No. 195654, November 25, 2015 - REYNALDO INUTAN, HELEN CARTE, NOEL AYSON, IVY
CABARLE, NOELJAMILI, MARITES HULAR, ROLITOAZUCENA, RAYMUNDO TUNOG, ROGER BERNAL,
AGUSTEV ESTRE, MARILOU SAGUN, AND ENRIQUE LEDESMA, JR., Petitioners, v. NAPAR
CONTRACTING & ALLIED SERVICES, NORMAN LACSAMANA, JONAS INTERNATIONAL, INC., AND
PHILIP YOUNG, Respondent.

SECOND DIVISION

G.R. No. 195654, November 25, 2015

REYNALDO INUTAN, HELEN CARTE, NOEL AYSON, IVY CABARLE, NOELJAMILI, MARITES
HULAR, ROLITOAZUCENA, RAYMUNDO TUNOG, ROGER BERNAL, AGUSTEV ESTRE,
MARILOU SAGUN, AND ENRIQUE LEDESMA, JR., Petitioners, v. NAPAR CONTRACTING &
ALLIED SERVICES, NORMAN LACSAMANA,*** JONAS INTERNATIONAL, INC., AND PHILIP
YOUNG, Respondent.

DECISION

DEL CASTILLO, J.:

A judicially approved compromise agreement has the effect and authority of res judicata.2 It is
final, binding on the parties, and enforceable through a writ of execution. Article 2041 of the Civil
Code, however, allows the aggrieved party to rescind the compromise agreement and insist upon
his original demand upon failure and refusal of the other party to abide by the compromise
agreement.

This Petition for Review on Certiorari2 assails the August 27, 2010 Decision3 of the Court of
Appeals (CA) in CA-G.R. SP No. 106724, which dismissed the Petition for Certiorari filed by
Reynaldo Inutan (Inutan), Helen Carte (Carte), Noel Ayson (Ayson), Ivy Cabarle (Cabarle), Noel
Jamili (Jamili), Maritess Hular (Hular), Rolito Azucena (Azucena), Raymundo Tunog (Tunog),
Jenelyn Sancho, Wilmar Bolonias, Roger Bernal (Bernal), Agustin Estre (Estre), Marilou Sagun
(Sagun), and Enrique Ledesma, Jr. (Ledesma), against respondents Napar Contracting & Allied
Services (Napar), Norman Lacsamana (Lacsamana), Jonas International, Inc. (Jonas), and Philip
Young (Young), and affirmed the June 26, 2008 Decision4and October 14, 2008 Resolution5 of the
National Labor Relations Commission (NLRC) in NLRC CA No. 041474-04 dismissing the
consolidated complaints against respondents for illegal dismissal with money claims on the ground
of res judicata. Likewise assailed is the CA's February 10, 2011 Resolution6 which denied the
Motion for Reconsideration.

Factual Antecedents

Petitioners Inutan, Carte, Ayson, Cabarle, Jamili, Hular, Azucena, Tunog, Bernal, Estre, Sagun, and
Ledesma were employees of respondent Napar, a recruitment agency owned and managed by
respondent Lacsamana. Napar assigned petitioners at respondent Jonas, a corporation engaged in
the manufacture of various food products with respondent Young as its President, to work as
factory workers, machine operator, quality control inspector, selector, mixer, and warehouseman.

Sometime in September of 2002, petitioners and other co-workers (complainants) filed before the
Arbitration Branch of the NLRC three separate complaints for wage differentials, 13th month pay,
overtime pay, holiday pay, premium pay for holiday and rest day, service incentive leave pay, and
unpaid emergency cost of living allowance (ECOLA) against respondents, docketed as NLRC NCR
Case Nos. 09-76698-2002, 09-08152-2002, and 09-08046-2002, which complaints were
consolidated before Labor Arbiter Jaime M. Reyno (LA Reyno).

On January 13, 2003, complainants and respondents entered into a Joint Compromise
Agreement7 which reads: chanRoble svirtual Lawli bra ry

JOINT COMPROMISE AGREEMENT

COMPLAINANTS and the RESPONDENTS, through their' respective counsel, respectfully submit the
following Compromise Agreement.

WHEREAS, the parties (except Susana Larga) deciding to finally write "finis" to the instant case,
have agreed to settle the instant case and to enter into a Compromise Agreement.

NOW THEREFORE, for and in consideration of the terms and conditions herein below stipulated, the
parties do hereby agree:

1. That the complainants should be considered regular employees of Napar

Contracting and Allied Services reckoned from their date of hire and are entitled
to all the benefits under the law due to regular employees;

2. That the complainants shall be re-assigned by Napar Contracting and Allied

Services and shall ensure that they will be given work within forty five days (45)
or until February 26,2002;

3. That in case Napar Contracting and Allied Services failed to re assign or provide
them work, complainants shall be reinstated in their payroll or be given their
salary equivalent to the existing minimum wage x x x;

4. That the complainants shall each receive the amount of SEVEN THOUSAND PESOS
as payment for their monetary claims and which amount shall be considered in
any future litigation;

5. That upon signing of this agreement and compliance with the stipulations herein
provided, the cases shall be deemed and considered fully and completely satisfied
and the complainants hereby release, remiss and forever discharge the herein
respondents, from any and all claims arising from the above cases;

6. The parties herein respectfully pray unto this Honorable Commission to approve
this Compromise Agreement and thereafter an Order be issued declaring the
judgment in the above-entitled cases fully and completely satisfied.
IN WITNESS WHEREFORE, the parties have hereunto set their hands this 13th day of January
2003.8
cralawlawl ibra ry
ChanRobles Vi rtualaw lib rary

In an Order9 dated January 16, 2003, LA Reyno approved the Joint Compromise Agreement,
enjoined the parties to fully comply with its terms and dismissed the case without prejudice.

In accordance with the Joint Compromise Agreement, complainants, on several instances, reported
to Napar. They were paid P7,000.00 each as part of the agreement but were required by Napar;
(1) to submit their respective bio-data/resume and several documents such as Police Clearance,
NBI Clearance, Barangay Clearance, Mayor's Permit, Health Certificate, drug test results,
community tax certificate, eye test results and medical/physical examination results; (2) to attend
orientation seminars; (3) to undergo series of interviews; and (4) to take and pass qualifying
examinations, before they could be posted to their new assignments. These requirements,
according to Napar, are needed to properly assess complainants' skills for new placement with the
agency's other clients.

Complainants failed to fully comply, hence they were not given new assignments.

Proceedings before the Labor Arbiter

Sensing Napar's insincerity in discharging its obligation in reassigning them, complainants filed
anew before the Arbitration Branch of the NLRC four separate Complaints10 for illegal dismissal,
non-payment of 13th month pay, wage differentials, overtime pay, service incentive leave pay,
holiday pay, premium pay for holiday and rest day, and moral and exemplary damages against
respondents, docketed as NLRC NCR Case Nos. 00-0505557-2003, 00-05-06187-2003, 00-05-
06605-2003,11 and 00-07-07792-2003. These complaints were consolidated.

In their Position Paper,12 complainants averred that Napar's failure to reinstate or provide them
work without any condition, in consonance with the terms of the Joint Compromise Agreement,
constitutes illegal constructive dismissal. They prayed for backwages plus separation pay in lieu of
reinstatement.

Respondents, in their Position Paper,13 claimed that they have fulfilled their obligation under the
agreement when Napar required complainants to report for work, to submit documentary
requirements, to undergo seminars and training, and to pass qualifying exams. They contended
that complainants were the ones who violated the agreement when they refused to comply with
the foregoing requirements in order to assess their working capabilities and skills for their next
posting. As such, they were deemed to have waived their right to be reassigned. They argued that
complainants should not have filed new complaints but should have instead moved for the
execution of the Joint Compromise Agreement. They then argued that the Labor Arbiter who
approved the said Joint Compromise Agreement or LA Reyno has exclusive jurisdiction to act on
the complaints.

In a Decision14 dated July 29, 2004, Labor Arbiter Pablo C. Espiritu, Jr. (LA Espiritu) held that the
conditions of the Joint Compromise Agreement particularly regarding reinstatement/reassignment
of complainants were violated thereby justifying rescission of the Joint Compromise Agreement. LA
Espiritu noted that complainants were correct in re-filing the complaints as this was an available
remedy under the NLRC Rules of Procedure when their previous complaints were dismissed
without prejudice. He struck down respondents' contention that a motion for execution of the
compromise agreement was the proper remedy, ratiocinating that the dismissal of the cases was
approved without prejudice and therefore cannot be the subject of an execution.

LA Espiritu then ruled that complainants were constructively dismissed as they were placed on
temporary off-detail without any work for more than six months despite being regular employees
of Napar. Doubting respondents' intention of reinstating complainants, LA Espiritu observed that
the submission of requirements and compliance with the procedures for rehiring should not be
imposed on complainants who are not newly-hired employees. Thus, Napar and Lacsamana were
held jointly and severally liable to pay complainants their separation pay in lieu of reinstatement
due to the already strainedrelations of the parties.

Respondents Jonas/Young, as indirect employers of complainants, were held jointly and severally
liable with Napar/Lacsamana for wage differentials, 13 month pay differentials, service incentive
leave pay, unpaid ECOLA, and holiday pay to some complainants, less the P7,000.00 already
received from respondents. The claims for premium pay for holiday, rest day, overtime pay, and
moral and exemplary damages were denied for lack of merit.

Proceedings before the National Labor Relations Commission

All parties appealed to the NLRC.

Complainants filed a partial appeal, arguing that LA Espiritu erred in not awarding backwages as
well as wage and 13th month pay differentials to nine of them.

Respondents, for their part, argued that LA Espiritu erred in failing to recognize the final and
binding effect of the Joint Compromise Agreement, contending that complainants are barred from
rescinding the agreement for having received P7,000.00 each as partial compliance and refusing to
comply with the requirements for their reassignment. Respondents Napar and Lacsamana, in their
Memorandum on Appeal,15 vehemently denied having illegally dismissed complainants and averred
that they have the prerogative to impose certain requirements in order to determine their working
skills vis-a-vis their new postings. And since they refused to comply, they have waived their right
to be reassigned. Respondents Jonas/Young, meanwhile, in its Notice of Appeal Memorandum of
Appeal,16 asserted that they cannot be held solidarity liable with respondents Napar and
Lacsamana since only Napar is obligated to reassign complainants under the Joint Compromise
Agreement.

In a Decision17 dated June 26, 2008, the NLRC granted respondents' appeal. It ruled that the
approval of the Joint Compromise Agreement by LA Reyno operates as res judicata between the
parties and renders it unappealable and immediately executory. It held that complainants had no
cause of action when they re-filed their complaints for being barred by res judicata. The NLRC, in
disposing of the case, ordered the issuance of a writ of execution to enforce the Joint Compromise
Agreement, thus: chanRoblesvi rtua lLawl ibra ry

WHEREFORE, premises considered, the appeal of respondents is GRANTED, while that of the
complainants is DISMISSED for lack of merit. The Decision of Labor Arbiter Pablo C. Espiritu, Jr.
dated July 29, 2004 is REVERSED and SET ASIDE, and a new one is rendered DISMISSING the
above-entitled complaints for having been barred by res judicata. The Order of Labor Arbiter Jaime
Reyno dated January 16, 2003 finding the Compromise Agreement entered into by the parties on
January 13, 2003 to be in order and not contrary to law and approving the same, stands valid,
effective and should be enforced. Let the records of this case be forwarded to the Labor Arbiter for
the issuance of a writ of execution to enforce the said Compromise Agreement.

SO ORDERED.18
cralawlawl ibra ry
ChanRoblesVi rtua lawlib rary

Complainants filed a Motion for Reconsideration,19 averring that the NLRC gravely erred in ordering
the issuance of a writ of execution despite the absence of a final judgment or a judgment on the
merits. They stand on their right to rescind the Joint Compromise Agreement and to insist on their
original demands when respondents violated the compromise agreement and on their right to re-
file their cases as sanctioned by the rules in cases of provisional dismissal of cases,

Napar and Lacsamana, on the other hand, filed a Motion for Partial Reconsideration20 praying for
the modification of the NLRC Decision in that complainants be declared to have waived their right
to their claims under the Joint Compromise Agreement for likewise violating the agreement.

Both motions were denied in the NLRC Resolution21 dated October 14, 2008.

Proceedings before the Court of Appeals

In their Petition for Certiorari22 filed before the CA, complainants insisted on their right to rescind
the Joint Compromise Agreement under Article 204123 of the Civil Code and on their right to re-file
their complaints under Section 16, Rule V of the NLRC Rules of Procedure.24

Napar and Lacsamana filed a Comment25 on the Petition. Jonas and Young, however, failed to file a
comment. As the CA did not acquire jurisdiction over Jonas and Young and on the basis of
complainants' manifestation that Jonas and Young had already ceased operation, Jonas and Young
were dropped as party respondents by the CA in its Resolution26 of December 16, 2009.

On August 27, 2010, the CA rendered a Decision27 affirming the NLRC. The CA considered the
January 16, 2003 Order of LA Reyno, which approved the Joint Compromise Agreement, as a
judgment on the merits, and held that the second set of complaints was barred by res
judicata. According to the C A, the complainants, in re-filing their complaints due to respondents'
unwarranted refusal to provide them work, were essentially seeking to enforce the compromise
agreement and were not insisting on their original demands that do not even include a claim for
illegal dismissal. Thus, the CA ruled that complainants should have moved for the execution of the
Joint Compromise Agreement instead of filing a separate and independent action for illegal
dismissal. The CA dismissed the Petition, viz.: chanRob lesvi rtual Lawl ibra ry

WHEREFORE, premises considered, the instant petition for certiorari is DISMISSED for lack of
merit. Accordingly, the June 26, 2008 Decision and October 14, 2008 Resolution of public
respondent National Labor Relations Commission are AFFIRMED.

SO ORDERED.28 cralawlawlib rary

Complainants filed a Motion for Reconsideration29 but it was likewise denied by the CA in its
Resolution30dated February 10, 2011.

Twelve of the complainants, herein petitioners, instituted the present Petition for Review
on Certiorari.

Issues

Petitioners presented the following issues: c hanRoble svirtual Lawlib ra ry

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT PETITIONERS' COMPLAINT
IS ALREADY BARRED BY RES JUDICATA.

II

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT, IN FILING THE SECOND
COMPLAINT, THE PETITIONERS ARE ENFORCING THE JOINT COMPROMISE AGREEMENT AND NOT
RESCINDING IT. THUS, THE PETITIONERS SHOULD HAVE MOVED FOR THE ISSUANCE OF A WRIT
OF EXECUTION BEFORE THE LABOR ARBITER INSTEAD OF FILING A SECOND COMPLAINT.

III

WHETHER THE PETITIONERS ARE ENTITLED TO SEPARATION PAY IN LIEU OF REINSTATEMENT

AND FULL BACKWAGES.31 cralawlawlib rary

Petitioners argue that the CA, in ordering the execution of the Joint Compromise Agreement, has
deprived them of their right of rescission under Article 2041 of the Civil Code. They posit that due
to the blatant violation by the respondents of the provisions of the Joint Compromise Agreement,
they only exercised the option accorded to them by law of rescinding the agreement and of
insisting upon their original demands by filing anew their Complaints. The inclusion of illegal
dismissal in their causes of action is, for petitioners, a necessary consequence of their subsequent
dismissal and the blatant omission of respondents' commitment to reinstate them. Petitioners thus
pray for the payment of separation pay in lieu of reinstatement and full backwages as a
consequence of their illegal dismissal.

Napar and Lacsamana on the other hand, aver that petitioners' sole remedy was to move for the
execution of the Joint Compromise Agreement. They aver that petitioners cannot be allowed to
rescind the agreement after having violated the same and having already enjoyed its benefits.
After all, the Joint Compromise Agreement is final, binding and constitutes as res judicata between
them.

Our Ruling

The Petition has merit. Petitioners' right to rescind the Joint Compromise Agreement and right to
re-file their complaints must prevail.

Petitioners validly exercised the

option of rescinding the Joint
CompromiseAgreement under
Article 2041 of the Civil Code

Article 2028 of the Civil Code defines a compromise agreement as a contract whereby the parties
make reciprocal concessions in order to avoid litigation or put an end to one already commenced.
If judicially approved, it becomes more than a binding contract; it is a determination of a
controversy and has the force and effect of a judgment.32 Article 227 of the Labor Code provides
that any compromise settlement voluntarily agreed upon by the parties with the assistance of the
Bureau of Labor Relations or the regional office of the Department of Labor and Employment shall
be final and binding upon the parties. Compromise agreements between employers and workers
have often been upheld as valid and accepted as a desirable means of settling disputes.33

Thus, a compromise agreement, once approved, has the effect of res judicata between the parties
and should not be disturbed except for vices of consent, forgery, fraud, misrepresentation, and
coercion.34 A judgment upon compromise is therefore not appealable, immediately executory, and
can be enforced by a writ of execution.35 However, this broad precept enunciated under Article
203736 of the Civil Code has been qualified by Article 2041 of the same Code which recognizes the
right of an aggrieved party to either (1) enforce the compromise by a writ of execution, or (2)
regard it as rescinded and insist upon his original demand, upon the other party's failure or refusal
to abide by the compromise. In a plethora of cases,37 the Court has recognized the option of
rescinding a compromise agreement due to non-compliance with its terms. We explained
in Chavez v. Court of Appeals:38chan roble svirtual lawlib rary

A compromise has upon the parties the effect and authority of res judicata;but there shall be no
execution except in compliance with a judicial compromise. cralawlawl ibra ry

Thus, we have held that a compromise agreement which is not contrary to law, public order, public
policy, morals or good customs is a valid contract which is the law between the parties
themselves. It has upon them the effect and authority of res judicata even if not judicially
approved, and cannot be lightly set aside or disturbed except for vices of consent and forgery.
However, in Heirs of Zari, et al v. Santos, we clarified that the broad precept enunciated in Art,
2037 is qualified by Art. 2041 of the same Code, which provides:
If one of the parties fails or refuses to abide by the compromise, the other party may either
enforce the compromise or regard it as rescinded and insist upon his original demand.
We explained, viz.:
[B]efore the onset of the new Civil Code, there was no right to rescind compromise agreements.
Where a party violated the terms of a compromise agreement, the only recourse open to the other
party was to enforce the terms thereof.

When the new Civil Code came into being, its Article 2041 xxx created for the first time the right
of rescission. That provision gives to the aggrieved party the right to "either enforce the
compromise or regard it as rescinded and insist upon his original demand." Article 2041 should
obviously be deemed to qualify the broad precept enunciated in Article 2037 that "[a] compromise
has upon the parties the effect and authority of res judicata.
In exercising the second option under Art. 2041, the aggrieved party may, if he chooses, bring the
suit contemplated or involved in his original demand, as if there had never been any compromise
agreement, without bringing an action for rescission. This is because he may regard the
compromise as already rescinded by the breach thereof of the other party. cralawlawlib rary
To reiterate, Article 2041 confers upon the party concerned the authority, not only to regard the
compromise agreement as rescinded but also, to insist upon his original demand. We find that
petitioners validly exercised this option as there was breach and non-compliance of the Joint
Compromise Agreement by respondents.

It is undisputed that Napar failed to reassign and provide work to petitioners. Napar, however,
puts the blame on petitioners for their alleged deliberate refusal to comply with the requirements
for reassignment to other clients. Napar claims that the imposition of these so-called
"reassessment procedures" will efficiently guide them on where to assign petitioners; it likewise
posits that it is a valid exercise of its management prerogative to assign workers to their principal
employer.

At the outset, it must be emphasized that there was no indication that petitioners deliberately
refused to comply with the procedures prior to their purported reassignment. Petitioners alleged
that they reported to Napar several times waiting for tlieir assignment and that Napar was giving
them a run-around even as they tried to comply with the requirements. These matters were not
disputed by respondents. Thus, we cannot agree with respondents were the ones who violated the
compromise agreement. Moreover, we are not persuaded by Napar's assertion that petitioners'
reassignment cannot be effected without compliance with the requirements set by it. Petitioners
are regular employees of Napar; thus, their reassignment should not involve any reduction in
rank, status or salary.39 As aptly noted by LA Espiritu, petitioners are not newly-hired employees.
Considering further that they are ordinary factory workers, they do not need special training or
any skills assessment procedures for proper placement. While we consider Napar's decision to
require petitioners to submit documents and employment clearances, to attend seminars and
interviews and take examinations, which according to Napar is imperative in order for it to
effectively carry out its business objective, as falling within the ambit of management prerogative,
this undertaking should not, however, deny petitioners their constitutional right of tenure. Besides,
there is no evidence nor any allegation proffered that Napar has no available clients where
petitioners can be assigned to work in the same position they previously occupied. Plainly, Napar's
scheme of requiring petitioners to comply with reassessment procedures only seeks to prevent
petitioners' immediate reassignment.

"We have held that management is free to regulate, according to its own discretion and judgment,
all aspects of employment, including hiring, work assignments, working methods, time, place and
manner of work, processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay off of workers and discipline, dismissal and recall of workers. The
exercise of management prerogative, however, is not absolute as it must be exercised in good
faith and with due regard to the rights of labor."40 Such "cannot be used as a subterfuge by the
employer to rid himself of an undesirable worker."41

Respondents' non-compliance with the strict terms of the Joint Compromise Agreement of
reassigning petitioners and ensuring that they will be given work within the required time
constitutes repudiation of the agreement. As such, the agreement is considered rescinded in
accordance with Article 2041 of the Civil Code. Petitioners properly chose to rescind the
compromise agreement and exercised the option of filing anew their complaints, pursuant to Art.
2041. It was error on the part of the CA to deny petitioners the right of rescission.

Still, respondents insist that petitioners cannot seek rescission for they have already enjoyed the
benefits of the Joint Compromise Agreement. According to respondents, petitioners' acceptance of
the amount of P7,000.00 each bars them from repudiating and rescinding the agreement.

The contention lacks merit for the following reasons. First, petitioners never accepted the meager
amount of P7,000.00 as full satisfaction of their claims as they also expected to be reassigned and
reinstated in their jobs. In other words, their acceptance of the amount of P7,000.00 each should
not be interpreted as full satisfaction of all their claims, which included reinstatement in their jobs.
The amount of P7,000.00 is measly compared to the amount of monetary award granted by LA
Espiritu and therefore makes the agreement unconscionable and against public policy,42 At this
point, it is worth noting that even quitclaims are ineffective in barring recovery for the full measure
of the worker's rights and that acceptance of benefits therefrom does not amount to
estoppel.43 Lastly, it must be emphasized that the Joint Compromise Agreement expressly
provided that each of the complainants shall receive P7,000.00 as payment for their monetary
claims and "which amount shall be considered in any future litigation."44By virtue of this
stipulation, the parties in entering into the agreement did not rule out the possibility of any future
claims in the event of non-compliance. As correctly ruled by LA Espiritu, this proviso showed that
petitioners were not barred from raising their money claims in the future.

Section 16 of Rule V of the NLRC Rules

of Procedure allows petitioners to re-file their
complaints which were previously dismissed
without prejudice

The Court also takes into account the circumstance that petitioners' previous complaints were
dismissed without prejudice. "A dismissal without prejudice does not operate as a judgment on the
merits."45 As contrasted from a dismissal with prejudice which disallows and bars the filing of. a
complaint, a dismissal without prejudice "does not bar another action involving the same parties,
on the same subject matter and theory."46 The NLRC Rules of Procedure, specifically Section 16 of
Rule V thereof, provides the remedy of filing for a revival or re-opening of a case which was
dismissed without prejudice within 10 days from receipt of notice of the order of dismissal and of
re-filing the case after the lapse of the 10-day period. Petitioners are thus not barred from re-filing
their Complaints.

In choosing to rescind the Joint Compromise Agreement and re-file their complaints, petitioners
can rightfully include their claim of illegal dismissal. The CA took off from the wrong premise that
petitioners, in re-filing their case, cannot be said to have opted to rescind the compromise
agreement since they were not insisting on their original claim. It must be noted that when
petitioners initially filed their first set of complaints for wage differentials, 13th month pay,
overtime pay, holiday pay, premium pay for holiday and rest day, service incentive leave pay, and
unpaid ECOLA (that does not include the claim of illegal dismissal), subsequent events transpired
which brought about their unceremonious suspension and dismissal from work. This then led to
the parties entering into the Joint Compromise Agreement whereby respondents undertook to
reinstate petitioners and pay them the sum of P7,000.00 in partial satisfaction of their claims. The
compromise agreement evinces and shows that petitioners' reinstatement was part of their original
demands. Besides, respondents acknowledged that the first and second sets of Complaints filed by
petitioners are similar in nature. Respondents even admitted that the issues raised in the first set
of Complaints were similar to the issues raised by petitioners when they filed anew their
Complaints. Nevertheless, the filing of a separate action for illegal dismissal shall only go against
the rule on multiplicity of suits. It is settled that a plaintiff may join several distinct demands,
controversies or rights of action in one declaration, complaint or petition.47 This is to avert duplicity
and multiplicity of suits that would farther delay the disposition of the case.

In view of the foregoing, we find that both the NLRC and CA gravely erred in dismissing
petitioners' Complaints on the ground of res judicata. LA Espiritu correctly assumed jurisdiction
and properly took cognizance of petitioners' consolidated complaints for illegal dismissal and other
monetary claims.

Petitioners are entitled to separation pay

and full backwages as well as to the other
monetary awards granted by the
Labor Arbiter

We, likewise, subscribe to LA Espiritu's ruling that petitioners, as regular employees, are deemed
to have been constructively and illegally dismissed by respondents. Being on floating status and
off-detailed for more than six months, not having been reinstated and reassigned by respondents,
petitioners are considered to have been constructively dismissed.48 Settled is the rule that an
employee who is unjustly dismissed from work shall be entitled to reinstatement, or separation
pay if reinstatement is no longer viable, and to his full backwages.49

LA Espiritu awarded petitioners separation pay in lieu of reinstatement. The Court agrees that the
award of separation pay is warranted due to the already strained relations between the parties.50
However, aside from separation pay, petitioners, for having been illegally dismissed, should also
be awarded full backwages, inclusive of allowances and their other benefits or their monetary
equivalent computed from November 9, 2002 (the date of their last work assignment or from the
time compensation was withheld from them) up to the date of finality of this Decision.
 While petitioners failed to raise the matter of entitlement to backwages before the CA, this does
not prevent the Court from considering their entitlement to the same. The Court has discretionary
authority to take up new issues on appeal if it finds that their consideration is necessary in arriving
at a just decision.

Anent the other monetary claims in petitioners' complaints, the awards granted to them by LA
Espiritu stand undisturbed for petitioners' failure to question the same on appeal before the CA
and even before this Court. Hence, we sustain the award of wage differentials, 13th month pay
differentials, service incentive leave pay, unpaid ECOLA, and holiday pay less the P7;000.00
already received by them.

WHEREFORE, the Petition is GRANTED. The August 27, 2010 Decision and February 10, 2011
Resolution of the Court of Appeals in CA-G.R. SP No. 106724 are REVERSED and SET ASIDE. The
July 29, 2004 Decision of the Labor Arbiter Pablo C. Espiritu, Jr. in NLRC NCR Case Nos. 00-05-
05557-2003, 00-05-06187-2003, 00-05-06605-2003 and 00-07-07792-2003 is REINSTATED. In
addition, respondents Napar Contracting & Allied Services and Norman Lacsamana are held jointly
and severally liable to pay petitioners Reynaldo Inutan, Helen Carte, Noel Ayson, Ivy Cabarle, Noel
Jamili, Maritess Hular, Rolito Azucena, Raymundo Tunog, Roger Bernal, Agustin Estre, Marilou
Sagun, and Enrique Ledesma, Jr. full backwages, inclusive of allowances and their other benefits
or their monetary equivalent computed from November 9, 2002 up to the date of finality of this
Decision.

SO ORDERED. chanroblesvi rtua llawli bra ry

Velasco, Jr.,* Brion, (Acting Chairperson), Mendoza, and Leonen, JJ., concur. chanroble slaw

Endnotes:

Philippine Supreme Court Jurisprudence > Year 1957 > October 1957 Decisions > G.R. No. L-9312 October 31,
1957 - ERNEST BERG v. NATIONAL CITY BANK OF NEW YORK

102 Phil 309:

EN BANC

[G.R. No. L-9312. October 31, 1957.]

ERNEST BERG, Plaintiff-Appellant, v. NATIONAL CITY BANK OF NEW YORK, Defendant-

Appellant.

Alva J. Hill, for Plaintiff-Appellant.

Ross, Selph, Carrascoso & Janda, for Defendant-Appellant.

SYLLABUS
1. obligation AND CONTRACT; COMPROMISE AGREEMENT; BEFORE PAYMENT TO BANK DURING
OCCUPATION WAS VALIDATED. — Where the plaintiff and defendant had previously entered into a
compromise agreement, whereby the former agreed to pay his indebtedness provided the latter
forego the payment of the interest which compromise was arrived at when there was still
uncertainty as to the validity of payments made to the Bank of Taiwan of prewar obligations and
the compromise was entered into avoid "the provocation of a suit" " which defendant was then
contemplating to take against the plaintiff and his brother in the belief that the payment made to
the Bank of Taiwan was not valid (Article 1809, Old Civil Code), Held: that it being a compromise,
it is binding upon the parties (Article 1809, Old Civil Code) and as such it has "the same authority
as re judicata" (Article 1809, Old Civil Code) and as such it has "the same authority as res
judicata" (Article 1816 Idem.)

2. ID.; ID.; TO SETTLE A CONTROVERSY. — As a rule, a compromise is entered into not because it
settles a valid claim but because it settles a controversy between the parties.

3. ID.; ID.; THREAT TO BRING ACTION TO ENFORCE COLLECTION IS NOT DURESS. — It is a

practice followed not only by banks but even by individual, to demand payment of their accounts
with the threat that upon failure to do so, an action would be instituted in court. Held: That such a
threat is proper within the realm of the law as a means to enforce collection, and it cannot
constitute duress even if the claim proves to be unfounded so long as the creditor believes that it
was his right to do so.

4. ID.; ID.; ABSENCE OF INTIMIDATION; CASE AT BAR. — As warranted by the facts and
circumstances established in the case at bar, the compromise agreement has been entered into
voluntarily and, as such, is valid and binding, since under law intimidation can only exist "when one
of the contracting parties is inspired with a reasonable and well grounded fear of suffering and
imminent and serious injury to his person or property" (Article 1267 , Old Civil Code).

DECISION

BAUTISTA ANGELO, J.:

In 1941, shortly before the outbreak of the war, the Red Star Stores, Inc. was indebted to the
National City Bank of New York, Manila Branch, hereinafter called the Bank, in the amount of
$19,956.75 representing certain import bills purchased by said Bank. This obligation was
guaranteed by Ernest Berg, hereinafter referred to as plaintiff, and by his brother, Alfred Berg.
During the Japanese occupation, the Bank of Taiwan required the Red Star Stores, Inc. to liquidate
its obligation and, accordingly, plaintiff paid the same in full.

After liberation, the Bank reopened and established a department to revise all prewar accounts and
take such steps as may be necessary to recover them. This department sent a letter to the Red
Star Stores, Inc. requesting it to indicate the steps it wanted to take to liquidate its prewar
obligation. On November 1, 1945, plaintiff contacted the officials of the Bank telling them that he
had already settled the account with the Bank of Taiwan during the Japanese occupation, but said
officials intimated that they could not regard such payment as discharging the obligation and
requested that it be paid. Plaintiff acknowledged his indebtedness and agreed to pay the same but
stated that he desired to consult first his lawyers as to the possible effect of the cases then
pending on the validity of wartime payments in Japanese military notes. Subsequently, on
February 1, 1946, plaintiff informed the Bank that he was willing to compromise his case by paying
the indebtedness provided the Bank forego its claim as to interest. This offer was approved and on
February 15, 1946, plaintiff signed an acknowledgment of the debt and an agreement relative to
its liquidation (Exhibit I). On March 23, 1946, plaintiff informed the Bank that, as the sale of his
real property had been delayed, he would not be able to make payment as agreed upon, but that,
in the meantime, he would execute a note and a pledge placing as security the 3,300 shares of
Filipinas Compañia de Seguros registered in his name. This was done and the agreement was
subsequently executed.
On March 12, 1946, the Court of First Instance of Manila decided the case of Haw Pia v. China
Banking Corporation holding that payments made in Japanese military currency to the Bank of
Taiwan did not operate to discharge the obligations, but on April 9, 1948, the decision was
reversed by the Supreme Court holding said payments to be valid (G. R. No. L-554) * . On June
22, 1946, having been advised that his note was falling due, plaintiff made a partial payment of
P4,913.50 and was given an extension of 30 days to pay the balance. On July 21, 1946, a second
notice was given plaintiff for the payment of the balance, and on July 31, plaintiff sent a letter
authorizing the Bank to sell the shares he had pledged to secure his debt and to deposit the
balance, if any, in his personal account. This was done thereby liquidating the account of plaintiff.

On September 27, 1948, plaintiff demanded from the Bank the repayment of the money paid by
him relying on the decision of the Supreme Court in the Haw Pia case. The Bank replied that the
case of the plaintiff had been compromised and can no longer be reopened. Whereupon on April
13, 1949, plaintiff commenced the present action to recover the amount paid, plus the sum of
P33,000 as damages.

In his complaint, plaintiff alleged that notwithstanding the fact that he had already paid his debt to
the Bank of Taiwan, defendant, by the use of deceit, fraud, threat and intimidation still forced him
to compromise his case as a result of which defendant sold his 3,300 shares of the Filipinas
Compañia de Seguros and retained the sum of P35,172.62 to pay the debt he had already paid to
the Bank of Taiwan. Defendant, in turn, denied the charge and alleged that plaintiff paid the sum of
P35,172.62 as a result of a compromise entered into for good and valuable consideration. And on
May 29, 1950, the court rendered judgment ordering defendant to pay to plaintiff said amount of
P35,172.62, with legal interest from August 6, 1946, plus the costs of action. No action was taken
on the claim for damages. In due time, both parties appealed from the decision, plaintiff insofar as
the court ignored his claim for damages, and defendant because of the adversed ruling rendered
against it.

In holding that the second payment made by plaintiff to defendant of the old indebtedness was
improperly made and as a consequence the money paid should be returned in view of the decision
of the Supreme Court in the Haw Pia case, the trial court made the following comments: jgc:chanrobles. com.ph

"There is not much to be discussed in this case. Was the payment made by the plaintiff during the
Japanese Administration valid? If it was valid, as the Court believes it to be, then the obligation of
the Red Store Co., Inc., was no longer existing at the time the plaintiff made the second payment.
If there was no more obligation to pay, then the demand made by the plaintiff for the payment of
the obligation of the ‘Red Stores Co., Inc.,’ was illegal. Either from the standpoint of the plaintiff or
from the standpoint of the defendant, the second payment was most unjustified. If payment was
made because of duress, threats, or intimidation, plaintiff is entitled to the recovery of the amount
he paid. If payment was made willingly and voluntarily in the belief that there was still an
obligation to be paid, equity and justice demand the return of the second payment for the reason
that there was no more obligation to be paid." cralaw virt ua1aw lib ra ry

Under ordinary circumstances, the above ruling of the court would be correct for indeed under
Article 1895 of the old Civil Code, "If a thing is received where there was no right to claim it, and
which through an error has been unduly delivered, an obligation to restore the same arises", and
apparently here we have a duplication of payment. But in the present case the situation is
different, for here we find that plaintiff and defendant had entered into a compromise whereby the
formed agreed to pay his indebtedness provided the latter forego the payment of the interest, and
this compromise was arrived at when there was still uncertainty as to the validity of the payments
made to the Bank of Taiwan of prewar obligations. Thus, on February 15, 1946, as a result of the
negotiations had between plaintiff and defendant, the latter sent to the former a letter of the
following tenor:

"Mr. Ernest Berg

1340 Oregon St.

Manila

Red Star Stores, Inc.

Dear Mr. Berg: chanrob1e s virtual 1aw l ib rary

This will confirm our conversation of this afternoon when you agreed to reimburse us in full for our
Advance Bills local amounting to US$19,956.75 against which we are prepared to waive interest up
to date.

It is our understanding that you have disposed of some property and when the deal is
consummated, which is expected next week, you will liquidate the subject’s pre-war indebtedness
to us.

We take this opportunity to convey our thanks for the splendid cooperation you have displayed in
discharging this obligation.

Very truly yours.

(Sgd.) FRED W. HENDER

Sub-Manager

I hereby acknowledge the above indebtedness and confirm that it will be fully liquidated.

(Sgd.) ERNEST BERG

Note that the letter says that it was a confirmation of a conversation had between plaintiff and
defendant regarding the settlement of the account previously had by the former the term of which
was that plaintiff would pay his account in full and defendant would waive the payment of interest.
Note also that at the foot of the letter there appears the following under the signature of plaintiff:
"I hereby acknowledge the above indebtedness and confirm that it will be fully liquidated." That
this agreement has the nature of a compromise cannot be denied for it was entered into to avoid
"the provocation of a suit" which defendant was then contemplating to take against plaintiff and his
brother in the belief that the payment made to the Bank of Taiwan was not valid (Article 1809, old
Civil Code). Note that at that time the decision of the Supreme Court in the Haw Pia case has not
as yet been rendered. It being a compromise, it is binding upon the parties (Article 1809, old Civil
Code), and as such it has "the same authority as res judicata" (Article 1816, Idem.) .

It is true that plaintiff claims that the agreement was forced upon him through deceit, fraud, threat
or intimidation, but the trial court did not predicate its decision on any of said grounds. Apparently,
the trial court was of the belief that a compromise can only be effected if the claim to be settled
was enforceable, which is not correct, for, as a rule, a compromise is entered into not because it
settles a valid claim but because it settles a controversy between the parties. And here there was a
real compromise when defendant waived the payment of interest amounting to over $4,000.

"‘The compromise of any matter is valid and binding, not because it is the settlement of a valid
claim, but because it is the settlement of a controversy.’ (Page 877.)

‘In order to effect a compromise there must be a definite proposition and an acceptance. As a
question of law it does not matter from whom the proposition of settlement comes; if one is made
and accepted, it constitutes a contract, and in the absence of fraud it is binding on both parties.’
(Page 879.)

‘Hence it is a general rule in this country, that compromises are to be favored, without regard to
the nature of the controversy compromised, and that they cannot be set aside because the event
shows all the gain to have been on one side, and all the sacrifice on the other, if the parties have
acted in good faith, and with a belief of the actual existence of the rights which they have
respectively waived or abandoned; and if a settlement be made in regard to such subject, free
from fraud or mistake, whereby there is a surrender or satisfaction, in whole or in part, of a claim
upon one side in exchange for or in consideration of a surrender or satisfaction of a claim in whole
or in part, or of something of value, upon the other, however baseless may be the claim upon
either side or harsh the terms as to either of the parties, the other cannot successfully impeach the
agreement in a court of justice . . . . Where the compromise is instituted and carried through in
good faith, the fact that there was a mistake as to the law or as to the facts, except in certain
cases where the mistake was mutual and correctable as such in equity, cannot afford a basis for
setting a compromise aside or defending against a suit brought thereon . . . . Furthermore, and as
following the rule stated, a compromise of conflicting claims asserted in good faith will not be
disturbed because by a subsequent judicial decision in an analogous case it appears that one party
had no rights to forego.’ (Pages 883, 884.)" (McCarthy v. Barber Steamship Lines, 45 Phil., 488,
498-499)

But plaintiff insists that the compromise is null and void as the same has been extorted from him
by the officials of the Bank through deceit, fraud and intimidation. In this respect, counsel for
defendant says: "Mr. Berg claims that the compromise agreement was secured from him by deceit,
fraud and unlawful action by the bank. The bank is referred to as an extortionist, and as a
blackmailer, as being guilty of making illegal demands, of coercing Mr. Berg, of resorting to
misrepresentation, illegal distortion, deceit and insidious machinations. Its acts are likened to those
of a traffic policeman soliciting a bribe, on one hand, and to a highwayman extracting money from
a wayfarer at the point of a gun, on the other. Mr. Berg’s counsel states that Mr. Berg was
compelled to settle because of fear for his life, of life imprisonment or a heavy fine, and fear of
financial ruin, the implication being that the bank would cause these dire contingencies should Mr.
Berg not pay the sums demanded" (p. 4, Defendant’s Memorandum).

But these imputations only find support in the testimony of plaintiff which were denied by the
officials of the Bank. In fact, they have not been substantiated. What plaintiff in effect wanted to
convey is that the officials of the Bank intimidated to him that unless the account is settled, the
Bank would bring an action against him or against his brother, Alfred Berg; that it would not
extend any further credit facilities to him or his business enterprises; and that it would make use of
its influence to prevent him from engaging in business in the Philippines. The question then that
arises is: Do these threats constitute duress under the law?

With regard to the first charge, we see nothing improper. It is a practice followed not only by
banks but even by individuals to demand payment of their accounts with the threat that upon
failure to do so an action would be instituted in court. Such a threat is proper within the realm of
the law as a means to enforce collection. Such a threat cannot constitute duress even if the claim
proves to be unfounded so long as the creditor believes that it was his right to do so. This charge
has no legal basis.

"One element of the early law of duress continues to exist, however its boundaries may be
otherwise extended. The pressure must be wrongful, and not all pressure is wrongful. The law
provides certain means for the enforcement of their claims by creditors. It is not duress to threaten
to take these means. Therefore, a threat to bring a civil action or to resort to remedies given by
the contract is not such duress as to justify recission of a transaction induced thereby, even though
there is no legal right to enforce the claim, provided the threat is made in good faith; that is, in the
belief that a possible cause of action exists. But, if the threat is made with the consciousness that
there is no real right of action and the purpose is coercion, a payment or contract induced thereby
is voidable. In the former case, it may be said that the threatened action was rightful; in the letter
case, it was not." (Section 1606, Williston on Contracts, Vol. V, pp. 4500-4502.)

Plaintiff also contends that the Bank had intimated that it would not extend to him or his enterprise
further credit facilities unless he settles the former debt of the Red Star Stores, Inc. Even if this
were true, the same cannot constitute duress that might invalidate the settlement, for there is
nothing improper for a bank to decline further credit to any person or entity as a means to enforce
the collection of its accounts if such is necessary to protect its investment. In fact, such is the
practice followed by most banking institutions for it goes a long way in the determination of the
paying capacity of those who deal with them. Moreover, the banking business in the Philippines is
extremely competitive. There are other banks that are opened for business whose facilities plaintiff
may avail of in case the threat is carried out and if plaintiff is a good business risk he could
certainly find accommodation in any one of them if he so desires. The fact that plaintiff was then
under indictment for treason does not change the situation. This is rather a further reason for
defendant to adopt a more stringent measure against plaintiff because of the belief, grounded or
otherwise, that the collection of the account might be frustrated. Such circumstance should not be
considered as a desire on the part of defendant to harrass or aggravate the alleged political or
financial difficulties of plaintiff.

Plaintiff likewise contends that the officials of the Bank have threatened him with reprisals in the
sense that unless he settles his account they would make use of their influence to prevent him
 from engaging in business in the Philippines. Not only is this claim inherently untenable but it was
flatly denied by the officials of the Bank. Certainly, plaintiff has not been able to indicate in what
manner does defendant or its officials expect to carry out the threat imputed to them.

All things considered, we find the charges of plaintiff unfounded. And considering that, under our
law, intimidation can only exist "when one of the contracting parties is inspired with a reasonable
and well-grounded fear of suffering an imminent and serious injury to his person or property"
(Article 1267, old Civil Code), we are persuaded to conclude that the compromise in question has
been entered into voluntarily and, as such, is valid and binding.

Having reached this conclusion, we find it unnecessary to discuss the appeal taken by plaintiff-
appellant.

Wherefore, the decision appealed from is reversed, with out pronouncement as to costs.

Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Labrador, Concepcion, Reyes, J. B. L.,
Endencia and Felix, JJ., concur.

Endnotes:

SECOND DIVISION

[G.R. No. 159411. March 18, 2005]

TEODORO I. CHAVEZ, petitioner, vs. HON. COURT OF APPEALS and

JACINTO S. TRILLANA, respondents.

DECISION
PUNO, J.:

Assailed in this petition for review is the Decision dated April 2, 2003 [1] of the Court
of Appeals in CA-G.R. CV No. 59023[2] which modified the Decision dated December 15,
1997 of the Regional Trial Court (RTC) of Valenzuela City, Branch 172, in Civil Case No.
5139-V-97, as well as its Resolution dated August 8, 2003 [3] which denied petitioners
motion for reconsideration.
The antecedent facts are as follows:
In October 1994, petitioner Teodoro Chavez and respondent Jacinto Trillana entered
into a contract of lease[4] whereby the former leased to the latter his fishpond at Sitio
Pariahan, Taliptip, Bulacan, Bulacan, for a term of six (6) years commencing from October
23, 1994 to October 23, 2000. The rental for the whole term was two million two hundred
forty thousand (P2,240,000.00) pesos, of which one million (P1,000,000.00) pesos was
to be paid upon signing of the contract. The balance was payable as follows:

b. That, after six (6) months and/or, on or before one (1) year from the date of signing
this contract, the amount of THREE HUNDRED FORTY-FOUR THOUSAND
(P344,000.00) pesos shall be paid on April 23, 1995 and/or, on or before October 23,
1995 shall be paid by the LESSEE to the LESSOR.

c. That, the LESSEE, shall pay the amount of FOUR HUNDRED FORTY-EIGHT
THOUSAND (P448,000.00) pesos x x x to the LESSOR on April 23, 1997 and/or, on
or before October 23, 1997, and on April 23, 1998 and/or, on or before October 23,
1998 the amount of FOUR HUNDRED FORTY-EIGHT THOUSAND (P448,000.00)
pesos x x x.

Paragraph 5 of the contract further provided that respondent shall undertake all
construction and preservation of improvements in the fishpond that may be destroyed
during the period of the lease, at his expense, without reimbursement from petitioner.
In August 1996, a powerful typhoon hit the country which damaged the subject
fishpond. Respondent did not immediately undertake the necessary repairs as the water
level was still high. Three (3) weeks later, respondent was informed by
a barangay councilor that major repairs were being undertaken in the fishpond with the
use of a crane. Respondent found out that the repairs were at the instance of petitioner
who had grown impatient with his delay in commencing the work.
In September 1996, respondent filed a complaint before the Office of
the Barangay Captain of Taliptip, Bulacan, Bulacan. He complained about the
unauthorized repairs undertaken by petitioner, the ouster of his personnel from the leased
premises and its unlawful taking by petitioner despite their valid and subsisting lease
contract. After conciliation proceedings, an agreement was reached, viz.:

KASUNDUAN

Napagkasunduan ngayong araw na to ika-17 ng Setyembre ng nagpabuwis Teodoro

Chavez at bumubuwis na si G. Jay Trillana na ibabalik ni G. Chavez ang
halagang P150,000.00 kay G. Trillana bilang sukli sa natitirang panahon ng
buwisan.

Ngunit kung maibibigay ni G. Chavez ang halagang P100,000.00 bago sumapit o

pagsapit ng ika-23 ng Setyembre, taong kasalukuyan, to ay nangangahulugan ng
buong kabayaran at hindi P150,000.00.

Kung sakali at hindi maibigay ang P100,000.00 ang magiging kabayaran ay

mananatiling P150,000.00 na may paraan ng pagbabayad ng sumusunod:

Ang P50,000.00 ay ibibigay bago sumapit o pagsapit ng ika-31 ng Oktubre 1996 at

ang balanseng P100,000.00 ay ibibigay sa loob ng isang taon subalit magbibigay ng
promissory note si G. Chavez at kung mabubuwisang ang kanyang palaisdaan ay
ibibigay lahat ni G. Chavez ang buong P150,000.00 sa lalong madaling panahon.

Kung magkakaroon ng sapat at total na kabayaran si G. Chavez kay G. Trillana ang

huli ay lalagda sa kasulatan bilang waiver o walang anumang paghahabol sa
nabanggit na buwisan.

Alleging non-compliance by petitioner with their lease contract and the

foregoing Kasunduan, respondent filed a complaint on February 7, 1997 against
petitioner before the RTC of Valenzuela City, docketed as Civil Case No. 5139-V-97.
Respondent prayed that the following amounts be awarded him, viz.: (a) P300,000.00 as
reimbursement for rentals of the leased premises corresponding to the unexpired portion
of the lease contract; (b) P500,000.00 as unrealized profits; (c) P200,000.00 as moral
damages; (d) P200,000.00 as exemplary damages; and, (e) P100,000.00 as attorneys
fees plus P1,000.00 for each court appearance of respondents counsel.
Petitioner filed his answer but failed to submit the required pretrial brief and to attend
the pretrial conference. On October 21, 1997, respondent was allowed to present his
evidence ex-parte before the Acting Branch Clerk of Court.[5] On the basis thereof, a
decision was rendered on December 15, 1997[6] in favor of respondent, the dispositive
portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

(1) Ordering the defendant to reimburse to the plaintiff the sum of P300,000.00
representing rental payment of the leased premises for the unused period of lease;

(2) Ordering the defendant to pay plaintiff the sum of P500,000.00 representing
unrealized profit as a result of the unlawful deprivation by the defendant of the
possession of the subject premises;

(3) Ordering the defendant to pay plaintiff the sum of P200,000.00 as moral damages;

(4) Ordering the defendant to pay plaintiff the sum of P200,000.00 as exemplary
damages; and

(5) Ordering the defendant to pay plaintiff the sum of P100,000.00 as and for
attorneys fees, plus costs of suit.

Petitioner appealed to the Court of Appeals which modified the decision of the trial
court by deleting the award of P500,000.00 for unrealized profits for lack of basis, and by
reducing the award for attorneys fees to P50,000.00.[7] Petitioners motion for
reconsideration was denied. Hence, this petition for review.
 Petitioner contends that the Court of Appeals erred in ruling that the RTC of
Valenzuela City had jurisdiction over the action filed by respondent considering that the
subject matter thereof, his alleged violation of the lease contract with respondent, was
already amicably settled before the Office of the Barangay Captain of Taliptip, Bulacan,
Bulacan. Petitioner argued that respondent should have followed the procedure for
enforcement of the amicable settlement as provided for in the Revised Katarungang
Pambarangay Law. Assuming arguendo that the RTC had jurisdiction, it cannot award
more than the amount stipulated in the Kasunduan which is P150,000.00. In any event,
no factual or legal basis existed for the reimbursement of alleged advance rentals for the
unexpired portion of the lease contract as well as for moral and exemplary damages, and
attorneys fees.
Indeed, the Revised Katarungang Pambarangay Law [8] provides that an amicable
settlement reached after barangay conciliation proceedings has the force and effect of a
final judgment of a court if not repudiated or a petition to nullify the same is filed before
the proper city or municipal court within ten (10) days from its date.[9] It further provides
that the settlement may be enforced by execution by the lupong tagapamayapa within six
(6) months from its date, or by action in the appropriate city or municipal court, if beyond
the six-month period.[10] This special provision follows the general precept enunciated in
Article 2037 of the Civil Code, viz.:

A compromise has upon the parties the effect and authority of res judicata; but there
shall be no execution except in compliance with a judicial compromise.

Thus, we have held that a compromise agreement which is not contrary to law, public
order, public policy, morals or good customs is a valid contract which is the law between
the parties themselves.[11] It has upon them the effect and authority of res judicata even
if not judicially approved,[12] and cannot be lightly set aside or disturbed except for vices
of consent and forgery.[13]
However, in Heirs of Zari, et al. v. Santos,[14] we clarified that the broad precept
enunciated in Art. 2037 is qualified by Art. 2041 of the same Code, which provides:

If one of the parties fails or refuses to abide by the compromise, the other party may
either enforce the compromise or regard it as rescinded and insist upon his original
demand.

We explained, viz:

[B]efore the onset of the new Civil Code, there was no right to rescind compromise
agreements. Where a party violated the terms of a compromise agreement, the only
recourse open to the other party was to enforce the terms thereof.

When the new Civil Code came into being, its Article 2041 x x x created for the first
time the right of rescission. That provision gives to the aggrieved party the right to
either enforce the compromise or regard it as rescinded and insist upon his original
demand. Article 2041 should obviously be deemed to qualify the broad precept
enunciated in Article 2037 that [a] compromise has upon the parties the effect and
authority of res judicata. (underscoring ours)

In exercising the second option under Art. 2041, the aggrieved party may, if he chooses,
bring the suit contemplated or involved in his original demand, as if there had never been
any compromise agreement, without bringing an action for rescission.[15] This is because
he may regard the compromise as already rescinded[16] by the breach thereof of the other
party.
Thus, in Morales v. National Labor Relations Commission[17] we upheld the
National Labor Relations Commission when it heeded the original demand of four (4)
workers for reinstatement upon their employers failure to comply with its obligation to pay
their monetary benefits within the period prescribed under the amicable settlement. We
reiterated the rule that the aggrieved party may either (1) enforce the compromise by a
writ of execution, or (2) regard it as rescinded and so insist upon his original demand upon
the other partys failure or refusal to abide by the compromise. We also recognized the
options in Mabale v. Apalisok,[18] Canonizado v. Benitez,[19] and Ramnani v. Court of
Appeals,[20] to name a few cases.
In the case at bar, the Revised Katarungang Pambarangay Law provides for a two-
tiered mode of enforcement of an amicable settlement, to wit: (a) by execution by
the Punong Barangay which is quasi-judicial and summary in nature on mere motion of
the party entitled thereto; and (b) an action in regular form, which remedy is
judicial.[21] However, the mode of enforcement does not rule out the right of rescission
under Art. 2041 of the Civil Code. The availability of the right of rescission is apparent
from the wording of Sec. 417[22] itself which provides that the amicable settlement may be
enforced by execution by the lupon within six (6) months from its date or by action in the
appropriate city or municipal court, if beyond that period. The use of the word may clearly
makes the procedure provided in the Revised Katarungang Pambarangay Law
directory[23] or merely optional in nature.
Thus, although the Kasunduan executed by petitioner and respondent before the
Office of the Barangay Captain had the force and effect of a final judgment of a court,
petitioners non-compliance paved the way for the application of Art. 2041 under which
respondent may either enforce the compromise, following the procedure laid out in the
Revised Katarungang Pambarangay Law, or regard it as rescinded and insist upon his
original demand. Respondent chose the latter option when he instituted Civil Case No.
5139-V-97 for recovery of unrealized profits and reimbursement of advance rentals, moral
and exemplary damages, and attorneys fees. Respondent was not limited to
claiming P150,000.00 because although he agreed to the amount in the Kasunduan, it is
axiomatic that a compromise settlement is not an admission of liability but merely a
recognition that there is a dispute and an impending litigation [24] which the parties hope
to prevent by making reciprocal concessions, adjusting their respective positions in the
hope of gaining balanced by the danger of losing.[25] Under the Kasunduan, respondent
was only required to execute a waiver of all possible claims arising from the lease contract
if petitioner fully complies with his obligations thereunder.[26] It is undisputed that herein
petitioner did not.
 Having affirmed the RTCs jurisdiction over the action filed by respondent, we now
resolve petitioners remaining contention. Petitioner contends that no factual or legal basis
exists for the reimbursement of alleged advance rentals, moral and exemplary damages,
and attorneys fees awarded by the court a quo and the Court of Appeals.
The rule is that actual damages cannot be presumed, but must be proved with a
reasonable degree of certainty.[27] In the case at bar, we agree with petitioner that no
competent proof was presented to prove that respondent had paid P300,000.00 as
advance rentals for the unexpired period of the lease contract. On the contrary, the lease
contract itself provided that the remaining rentals of P448,000.00 shall be paid on April
23, 1997 and/or, on or before October 23, 1997, and on April 23, 1998 and/or, on or
before October 23, 1998 the amount P448,000.00. Respondent filed his complaint on
February 7, 1997. No receipt or other competent proof, aside from respondents self-
serving assertion, was presented to prove that respondent paid the rentals which were
not yet due. No proof was even presented by respondent to show that he had already
paid P1,000,000.00 upon signing of the lease contract, as stipulated therein. Petitioner,
in paragraphs 2 and 7 of his answer,[28] specifically denied that respondent did so. Courts
must base actual damages suffered upon competent proof and on the best obtainable
evidence of the actual amount thereof.[29]
As to moral damages, Art. 2220 of the Civil Code provides that same may be
awarded in breaches of contract where the defendant acted fraudulently or in bad faith.
In the case at bar, respondent alleged that petitioner made unauthorized repairs in the
leased premises and ousted his personnel therefrom despite their valid and subsisting
lease agreement. Petitioner alleged, by way of defense, that he undertook the repairs
because respondent abandoned the leased premises and left it in a state of disrepair.
However, petitioner presented no evidence to prove his allegation, as he did not attend
the pretrial conference and was consequently declared in default. What remains
undisputed therefore is that petitioner had a valid and subsisting lease contract with
respondent which he refused to honor by giving back possession of the leased premises
to respondent. We therefore sustain the conclusion of both the trial court and the Court
of Appeals that an award of moral damages is justified under the circumstances. We
likewise sustain the award for exemplary damages considering petitioners propensity not
to honor his contractual obligations, first under the lease contract and second, under the
amicable settlement executed before the Office of the Barangay Captain. Since
respondent was compelled to litigate and incur expenses to protect his interest on account
of petitioners refusal to comply with his contractual obligations,[30] the award of attorneys
fees has to be sustained.
IN VIEW WHEREOF, the petition is PARTIALLY GRANTED. The assailed Decision
dated April 2, 2003 of the Court of Appeals in CA-G.R. CV No. 59023 is modified by
deleting the award of P300,000.00 as reimbursement of advance rentals. The assailed
Decision is AFFIRMED in all other respects.
SO ORDERED.
Austria-Martinez, Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.
[1]Rollo, pp. 28-35.
[2]Entitled Jacinto S. Trillana, plaintiff-appellee v. Teodoro Chavez, defendant-appellant.
[3] Rollo, pp. 37-38.
[4] Entitled Contract of Lease of Fishpond, Id., pp. 46-50; Original Records, pp. 8-12.
[5] Order dated October 21, 1997 issued by Judge Floro P. Alejo, RTC of Valenzuela City, Branch 172;
Original Records, p. 46.
[6] Rollo, pp. 58-59; Original Records, pp. 50-51.
[7] Supra at Note 1.
[8] Codified in Sections 399-422, Chapter VII, Title One, Book III, and Sec. 515, Title One, Book IV of
Republic Act No. 7160, otherwise known as the Local Government Code of 1991.
[9] Section 416, Chapter VII, Title One, Book III of R.A. No. 7160.
[10] Section 417, Chapter VII, Title One, Book III of R.A. No. 7160. See Vidal v. Escueta, 417 SCRA 617
(2003).
[11] Pasay City Government v. CFI of Manila, Br. X, 132 SCRA 156 (1984), citing Municipal Board of
Cabanatuan City v. Samahang Magsasaka, Inc., 62 SCRA 435 (1975).
[12] Vda. de Guilas v. David, 23 SCRA 762 (1968).
[13] Binamira v. Ogan-Occena, 148 SCRA 677 (1987).
[14] 137 Phil. 79 (1969).
[15] Leonor v. Sycip, 1 SCRA 1215 (1961). See also Iloilo Traders Finance, Inc. v. Heirs of Oscar Soriano,
Jr., 404 SCRA 67 (2003), citing Diongzon v. Court of Appeals, 321 SCRA 477 (1999).
[16] Leonor v. Sycip, supra.
[17] 241 SCRA 103 (1995).
[18] 88 SCRA 234 (1979).
[19] 127 SCRA 610 (1984).
[20] 360 SCRA 645 (2001).
[21] See Vidal v. Escueta, supra.
[22] The amicable settlement or arbitration award may be enforced by execution by the lupon within six (6)
months from the date of the settlement. After the lapse of such time, the settlement may be enforced
by action in the appropriate city or municipal court.
[23] Maceda, Jr. v. Moreman Builders Co., Inc., 203 SCRA 293 (1991).
[24] Servicewide Specialists, Inc. v. Court of Appeals, 257 SCRA 643 (1996).
[25] Genova v. De Castro, 407 SCRA 165 (2003).
[26] The last paragraph of the Kasunduan specifically reads: Kung magkakaroon ng sapat at total na
kabayaran si G. Chavez kay G. Trillana ang huli ay lalagda sa kasulatan bilang waiver o walang
anumang paghahabol sa nabanggit na buwisan.
[27] Chan v. Maceda, Jr., 402 SCRA 352 (2003).
[28] Original Records, pp. 22-23.
[29] Id.
[30] See Tugade, Sr. v. Court of Appeals, 407 SCRA 497 (2003).

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-14220 April 29, 1961

DOMINGO E. LEONOR, plaintiff-appellee,

vs.
FRANCISCO SYCIP, defendant-appellant.

Patricio D. Senador and Ricardo D. Galano for plaintiff-appellee.

Vicente Salvadora for defendant-appellant.

CONCEPCION, J.:

Appeal from a decision of the Court of First Instance of Rizal, the dispositive part of which reads:

IN VIEW OF THE FOREGOING, the Court hereby renders judgment ordering the defendant,
Francisco Sycip, to vacate the leased premises, to pay plaintiff Domingo E. Leonor the back
rentals from July 13, 1956 at the rate of THREE HUNDRED FIFTY (P350.00) PESOS a
month until he shall have vacated the leased premises and to pay the costs.

The case is before us, the pertinent facts having been agreed upon and only questions of law being
raised in the appeal.

On July 11, 1955, plaintiff Domingo E. Leonor and defendant Francisco Sycip entered into a
contract, whereby the former leased to the latter a two-story building located at No. 1728-D Taft
Avenue, interior, Pasay City, for a period of two years, beginning from August 1, 1955, at a monthly
rental of P350.00. From July to October, 1956, Sycip failed to pay the corresponding rentals in view
of which, on October 12, 1956, Leonor instituted against him, in the municipal court of Pasay City,
Civil Case No. 1972 thereof, for unlawful detainer. Inasmuch as, on October 19, 1956, one Napoleon
A. Coronado agreed to guarantee the payment of the rentals due from Sycip by assigning to Leonor
his (Coronado's) rights under a deed of chattel mortgage executed, prior thereto, by Sycip in his
(Coronado's) favor, on November 10, 1956, Leonor moved for the dismissal of said case No. 1972,
which was granted on November 12, 1956.

As Sycip kept on defaulting in the payment of rentals, Leonor requested the Sheriff of Pasay City, on
February 11, 1957, to cause the personal property subject to said chattel mortgage to be foreclosed
extrajudicially, as stipulated in the contract, but this provision thereof could not be enforced because
Sycip refused to surrender' said property to the sheriff. Hence, on March 7, 1957, Leonor again sued
Sycip in the municipal court of Pasay City for unlawful detainer (Civil Case No. 2067), to eject him
from the leased premises and collect the rentals from July, 1956 to March, 1957. On the date set for
the hearing of the case, Leonor introduced his evidence, after which Sycip waived his right to
introduce evidence and submitted the case for decision, which was rendered on May 24, 1957. It
sentenced Sycip to vacate said premises and to pay Leonor P3,800 as rentals due up to said date,
with interest thereon at the legal rate from the institution of the case, as well as the rentals that may
fall due thereafter, at the rate of P350 a month, until the premises shall have been vacated, in
addition to P150 as attorney's fees, and the costs of the proceedings.

On May 27, 1957, Sycip filed notice of appeal from this decision. Pending perfection of the appeal,
or on May 28, 1957, plaintiff moved for the immediate execution of said decision, which was granted
on June 1, 1957. Pursuant to the writ of execution accordingly issued, the Sheriff of Pasay City sold
at public auction, on July 8, 1957, certain properties of Sycip for the sum of P3,500. Deducting this
sum from the amount then due from Sycip under the appealed decision, or P4,495.60, plus the
expenses of execution, amounting P327.00, there remained a balance of P1,322.60 still due from
him. Moreover, Sycip's ejectment took place on July 13, 1957. When the appealed case was heard
in the Court of First Instance of Rizal (Civil Case No. 1756-P), Sycip maintained that it should be
dismiss upon the ground:

I. That the claim set forth in the complaint has be released;

II. That the Assignment of Chattel Mortgage which dismissed the first action (Civil Case No.
1792) a compromise agreement that had upon the parties the effect and authority of Res-
Judicata;

III. That the second action, the case at bar, (Civil Case No. 2067) cannot be taken to mean
as a rescission of the compromise agreement.

Said court, however, overruled defendant's pretense an rendered the decision appealed from. A
reconsideration thereof having been denied, the case has been brought us on appeal taken by
Sycip.

Appellant says that the lower court erred in holding the claim set forth in the complaint herein has not
been "released by novation", which he maintains, took place, because the deed of assignment by
Coronado to Leonor the chattel mortgage executed by Sycip in favor of Coronado stated that the
sum of P2,450 then due from Sycip was payable on December 31, 1956, whereas the contract of
lease between Leonor and Sycip stipulated that the agree rentals were "payable on or before the 5th
of every month'. Said assignment was made, however, on October 6, 1956 and, hence, the period
therein given for the payment of the aforementioned sum of P2,450.00, due up to that date, did not
novate or otherwise affect the obligation to pay the rentals accruing subsequently thereto, in
conformity with the provisions of the aforementioned contract of leas or "on or before the 5th of every
month", although payment of these rentals was also guaranteed by the chattel mortgage thus
assigned to Leonor. Inasmuch as Sycip continued defaulting in the payment of such rentals, an
failed to pay the same as well as to vacate the leased premises despite repeated demands, it follows
that Leonor was entitled to seek the proper remedy against the resulting unlawful detainer by Sycip.

Obviously, the security given to guarantee the payment of rentals falling due after October 6, 1956,
did not extinguish or novate the obligation to satisfy the same, or impair the right of the lessor to the
aforementioned remedy (Bank of the P.I. v. Herridge, 47 Phil. 57; Asia Banking Manresa 429). There
Corporation v. Lacson, 48 Phil. 482; 8 Manresa 429). There is no incompatibility between, either this
remedy or said obligation, on the one hand, and the aforementioned security, on the other. On the
contrary, the chattel mortgage bolstered up said remedy and strengthened the effectivity of the
obligation, by insuring the collection of the money judgment that may be rendered in the action for
unlawful detainer.
It is next urged by the defendant that plaintiff should have sought a judicial foreclosure of the chattel
mortgage or sued the guarantor Napoleon A. Coronado. This contention is premised upon the
assumption that by plaintiff's acceptance of the assignment of chattel mortgage, there had been a
novation of the lease contract between him and Sycip, for the period subsequent to October 6, 1956,
which is not a fact. Plaintiff had, of course, the option to seek a judicial foreclosure of said chattel
mortgage, but he was not bound to do so, for the assignment in his favor of the chattel mortgage
merely gave him additional rights. It did not deprive him of any of his existing rights, either
substantive or procedural, except insofar as the sum of P2,450 due as rentals up to October 6, 1956,
which was made payable on or before December 31, 1956. With respect to the rentals
accruing after October 6, 1956, he retained all such rights, plus the corresponding lien on the
personal property subject to the chattel mortgage.

Contrary to defendant's pretense, plaintiff could not have sued Coronado for, by virtue of his
aforementioned assignment, the latter merely yielded his preferred lien in favor of plaintiff herein,
and did not assume any responsibility for defendant's obligation in favor of plaintiff herein. Besides,
having violated the chattel mortgage contract, by refusing to deliver the mortgaged property to the
sheriff, for purposes of the extra-judicial foreclosure, to which the defendant had explicitly agreed in
the deed of chattel mortgage, he may not require the plaintiff to adhere thereto (Art. 1191,, Civil
Code of the Phil.). Again, owing to the breach of the compromise agreement between the parties,
resulting, not only from defendant's refusal to deliver the mortgaged property to the sheriff, but, also,
from his failure to pay, on or before December 31, 1956, the sum P2,450, due on October 6, 1956,
plaintiff has, under Article 2041 of the Civil Code of the Philippines, the right eigth to "enforce the
compromise or regard it as rescinded a insist upon his original demand".

It is worthy of notice, in this connection, that, unlike Article 2039 of the same Code, which speaks of
"a cause of annulment or rescission of the compromise" and provides that "the compromise may be
annulled or rescinded" for the cause therein specified, thus suggesting an action for annulment or
rescission, said Article 2041 confers up the party concerned, not a "cause" for rescission, or t right to
"demand" the rescission, of a compromise, but the authority, not only to "regard it as rescinded", but,
also, to "insist upon his original demand". The language this Article 2041, particularly when
contrasted with that of Article 2039, denotes that no action for rescission required in said Article
2041, and that the party aggrieved by the breach of a compromise agreement may, if he choose
bring the suit contemplated or involved in his original demand, as if there had never been any
compromise agreement, without bringing an action for rescission thereof. He need not seek a judicial
declaration of rescission, he may "regard" the compromise agreement already rescinded".

Any other view would lead, insofar as the parties here are concerned, to a splitting of plaintiff's cause
of action Indeed, to seek a rescission of the compromise, an action would have to be brought in the
court of first instance, such action is incapable of pecuniary estimation, where the unlawful detainer
case would have to be filed with municipal court. Moreover, if the right of action for unlawful detainer
would be subordinated to the action for rescission of the compromise agreement, then the latter
would be a prejudicial question and the proceedings the former would have to be suspended until
the final disposition of the action for rescission. The summary naturalization of the remedy of
unlawful detainer would thus be completely defeated or destroyed. Surely, the framers of Article
2041 of the Civil Code of the Philippines could not have intended such result. The case of Bas Vda.
de Concepcion v. Santos, L-3585 (July 9, 1951), cited in appellant's brief, involved a compromise
made on January 24, 1943, years before the approval of said Code, and, hence, it is not in point.

In the light of the foregoing, defendant's theory to the effect that plaintiff's complaint in the present
case contains no allegations to warrant rescission of their compromise agreement is pointless, an
action for rescission being unnecessary.
Defendant brands the decision of the Court of First Instance of Rizal as vague and erroneous
because it sentences him to pay the plaintiff back rentals, at the rate of P350.00 a month, from July
13, 1956 until such time as he (defendant) shall have vacated the leased premises, whereas the
record on appeal shows that he had been ejected from said premises on July 13, 1957, or prior to
the rendition of said decision on March 29, 1958. This fact does 'not retract, however, from the
precision and accuracy of said decision, for, pursuant thereto, he shall pay rentals, at the
aforementioned rate, from July 13, 1956 to July 13, 1957.

WHEREFORE, the decision appealed from is hereby affirmed, with costs against defendant-
appellant, Francisco Sycip.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes and Dizon,
JJ., concur.

The Lawphil Project - Arellano Law Foundation

Philippine Supreme Court Jurisprudence > Year 2016 > August 2016 Decisions > G.R. No. 205623, August 10,
2016 - CONCHITA A. SONLEY, Petitioner, v. ANCHOR SAVINGS BANK/ EQUICOM SAVINGS BANK, Respondent.:

G.R. No. 205623, August 10, 2016 - CONCHITA A. SONLEY, Petitioner, v. ANCHOR SAVINGS
BANK/ EQUICOM SAVINGS BANK, Respondent.

SECOND DIVISION

G.R. No. 205623, August 10, 2016

CONCHITA A. SONLEY, Petitioner, v. ANCHOR SAVINGS BANK/ EQUICOM SAVINGS

BANK, Respondent.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the Court of Appeals' August 28, 2012 Decision2 and
January 25, 2013 Resolution3 denying herein petitioner Conchita A. Sonley's Urgent Motion for
Reconsideration4 in CA-G.R. SP No. 122409.

Factual Antecedents

The facts, as succinctly narrated by the Court of Appeals (CA), are as follows: ChanRobles Virtualawl ibra ry
The instant case arose when, on March 13, 2009, the petitioner5 filed a Complaint6 for declaration
of nullity of rescission of contract and damages in the trial court7 against x x x Anchor Savings
Bank ("Anchor"), a thrift banking institution organized and existing under the laws of the
Philippines [whose] business name xxx was [later] changed to Equicom Savings Bank x x x

In the said complaint, petitioner alleged that, on January 28, 2005, she agreed to purchase a real
property from [Anchor] for the sum of x x x Php2,200,000.00 xxx. The said real property pertained
to a parcel of land that had been foreclosed by [Anchor] with an area of x x x 126.50 square
meters xxx located at Fairview, Quezon City ("subject property" Pursuant to the said agreement,
the parties entered into a Contract to Sell8 whereby the petitioner agreed to pay the amount of x x
x Php200,000.00 x x x as downpayment xxx with the balance of x x x Php2,000,000.00 xxx
payable in sixty (60) monthly installments amounting to xxxPhp47,580.00 xxx.

Petitioner, however, defaulted in paying her monthly obligations xxx which prompted [Anchor] to
rescind the contract to sell xxx. In filing the complaint xxx petitioner averred that the rescission of
the contract to sell was null and void because she had already substantially paid her obligation to
the bank.

In its Answer9 [Anchor] denied the allegations that were made by the petitioner in her complaint.
On the contrary, it contended that the post-dated checks which were issued by the petitioner in its
favor covering the monthly installments for the purchase of the subject property were all
dishonored by the drawee bank when they were presented for payment. Thus, [Anchor] averred
that petitioner should not be allowed to benefit from her own fault and prevent [Anchor] from
exercising its right to rescind their contact to sell.

Subsequently, after the issuance of a Pre-Trial Order by the trial court, the parties agreed to an
amicable settlement and entered into a Compromise Agreement.10 On the basis thereof, the trial
court rendered a Judgment11 xxxon August 16,2010 whereby the petitioner agreed to repurchase
the subject property from [Anchor] for the amount of x x x Phpl ,469,460.66 xxx plus xxx 12% x x
x interest per annum.

However, [Anchor] later on filed a Manifestation and Motion for Execution12 in the trial court
claiming that petitioner had not been paying the agreed monthly installments in accordance with
the compromise agreement. Moreover, it averred that all the checks which the petitioner issued to
pay her obligations were again dishonored. Thus, [Anchor] prayed that a writ of execution be
issued by the trial court in its favor ordering: (1) that the contract to sell that was entered into
between the parties be rescinded; (2) that [Anchor] be allowed to apply all the payments that were
made to it by the petitioner as rentals; and (3) that petitioner immediately vacate the subject
property,

Consequently, on September 8, 2011, the trial court issued the assailed order13 the dispositive
portion of which states: ChanRoblesVirtualawli bra ry

'WHEREFORE, premises considered, the 'Manifestation and Motion for Execution' is hereby
GRANTED.

Consequently, the Judgment dated August 16, 2010 should be entered in the Book of Entries of
Judgment as final and executory. Accordingly, let a writ of execution be issued and the Deputy
Sheriff of this Court is hereby ordered to implement the same.

SO ORDERED;

In arriving at the said ruling, the trial court ratiocinated as follows:

'In view of the foregoing and for failure of the plaintiff to comply with the terms and conditions
chanRoble svirtual Lawlib ra ry

of the Compromise Agreement and since said Judgment itself provides that the same shall t>e
immediately final and executory, the Decision dated August 16, 2010 is hereby reiterated as final
and executory and should | now be entered in the Book of Entries and Judgment. Accordingly, a
writ of execution should now be issued to implement the aforesaid Judgment in consonance with
the Compromise Agreement and in line with Rule 39 Section 1 of the Rules of Court, to wit: ChanRobles Vi rtua lawlib rary

'Section 1. Execution upon judgments or final orders. - Execution shall issue as a matter of right on
motion, upon a judgment or order that disposes of the action or proceeding upon the expiration of
the period to appeal therefrom if no appeal has been duly perfected.'14
Riding of the Court of Appeals

Petitioner filed a Petition for Certiorari before the CA, docketed as CA-G,R. SP No. 122409, claiming
that the trial court committed grave abuse of discretion in issuing a writ of execution, since there is
nothing in the trial court's August 16,2010 judgment which authorizes the issuance of such a writ
in case the parties fail to perform the obligations stated under the Compromise Agreement.

In its assailed August 28,2012 Decision, however, the CA ruled against the petitioner, pronouncing
thus: ChanRoblesVirt ualawli bra ry

In sum, the sole issue to be resolved by us in this case is whether or not the trial court may issue a
writ of execution against the petitioner despite the fact that the issuance thereof was not
specifically provided for in the judgment which it rendered based on compromise agreement. After
a careful and judicious scrutiny of the whole matter, together with the applicable laws and
jurisprudence in the premises, we find the instant petition to be bereft of merit.

A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a

litigation or put an end to one already commenced. Like any other contract, a compromise
agreement must comply with the requisites in Article 1318 of the Civil Code, to wit: (a) consent of
the contracting parties; (b) object certain that is the subject matter of the contact; and (c) cause
of the obligation that is established. Like any other contract, the terms and conditions of a
compromise agreement must not be contrary to law, morals, good customs, public policy and
public order, x x x

Corollary thereto, once submitted to the court and stamped with judicial approval, a compromise
agreement becomes more than a mere private contract binding upon the parties. Having the
sanction of the court and entered as its determination of the controversy, it has the force and
effect of any judgment.

In the case at bench, the petitioner pointed out that the issuance of a writ of execution was not
warranted and had no legal basis under the judgment based on compromise agreement that was
rendered by the trial court. In support of her argument, petitioner relied on paragraph (c) of the
said agreement which provides as follows: ChanRobles Vi rtua lawlib rary

'(c) Penalty. In case of failure of the plaintiff to pay, for any reason whatsoever, the amount
provided in the Schedule of Payment, the plaintiff hereby agrees to pay, in addition to, and
separate from, the interest rate agreed upon, a penalty charge of FIVE PERCENT (5%) per month
or a fraction thereof, based on unpaid installments computed from due date until fully paid. This
shall be without prejudice to the right of the defendant to rescind this Compromise Agreement as
provided under the 'Contact to Sell' dated 21 December 2007 upon compliance with the
requirements provided for under the law.'
Petitioner insisted that, pursuant to the foregoing stipulation, [Anchor] was only entitled to an
additional penalty charge of five percent (5%) per month in case she failed to pay her monthly
obligations. Thus, she posited that the trial court committed grave abuse of discretion when it
issued a writ of execution against her when she defaulted in her payment because the terms of
their compromise agreement did not provide for Hie said remedy.

The foregoing contentions adduced by the petitioner are untenable and devoid of merit. True, the
compromise agreement between the parties stated that, in case of the petitioner's failure to pay
her obligation, she agreed to pay interests and penalties [sic] charges. However, paragraph (c) of
the compromise agreement likewise provided that petitioner's payment of the additional interests
and charges 'shall be without prejudice to the right of the defendant to rescind this Compromise
Agreement as provided under the 'Contact to Sell' dated 21 December 2007.' On this note, it bears
stressing mat the pertinent portions of the contact to sell read as follows:

'RESCISSION OF CONTRACT
chanRoble svirtual Lawlib ra ry

'The failure of the BUYER to pay on due date any monthly installmentin accordance with the
Schedule of Payment provided in Paragraph 2 - Manner of Payment, or if, at any time, the SELLER
is of the opinion that the BUYER would be unable to pay or meet his obligations under this Contract
or in case the BUYER was declared in default by any other creditor, then the SELLER shall be
entitled, as a matter of right, to rescind the Contract.'

'FORFEITURE OF PAYMENTS
'As a consequence of the rescission of this Contract pursuant to Paragraph 5 above, any
and/or all payments made by the BUYER under this Contract shall be deemed forfeited in
favour of the SELLER and shall be applied as rentals for the use and occupancy of the
PROPERTY and/or as and by way of liquidated damages and indemnification for opportunity loss
and/or other losses, the BUYER hereby acknowledging and confirming that the SELLER was
deprived of the opportunity to offer the PROPERTY for sale to other interested parties or dispose
thereof in such manner as it deems necessary or appropriate during the existence of this Contract.'
Considering the aforequoted stipulations in the compromise agreement and the contract to sell,
this Court does not find any merit in the claim of the petitioner that [Anchor] could not avail of the
remedy of rescission in case of default in payment by the petitioner. On the contrary, the intent of
the contracting parties was clearly embodied in the compromise agreement when the said
agreement stated that the petitioner should pay additional charges should she default in the
payment of her obligations x x x. The payment of said additional amounts, however, shall be
without prejudice to [Anchor's] right to rescind the contract to sell and consider the payments that
were already made by the petitioner as rentals for her use and occupation of the subject property.

Verily, it is a settled rule that a compromise agreement, once approved by final order of the court,
has the force of res judicata between the parties and should not be disturbed except for vices of
consent or forgery. Hence, a decision on a compromise agreement is final and executory and it has
the force of law and is conclusive between the parties. It transcends its identity as a mere contract
binding only upon the parties thereto as it becomes a judgment that is subject to execution in
accordance with the Rules of Court. In this regard, Article 2041 of the Civil Code explicitly provides
that, if one of the parties fails or refuses to abide by the compromise agreement, the other party
may either enforce the compromise or regard it as rescinded and insist upon his or her original
demand.

At this point, it bears stressing that a petition for certiorari against a court which has jurisdiction
over a case will prosper only if grave abuse of discretion is manifested. The burden is on the part
of the petitioner to prove not merely reversible error but grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the [court] issuing the impugned order. Mere abuse of
discretion is not enough; it must be grave,

Here, there is a paucity of circumstance which would persuade us to grant the instant petition.
There was no hint of whimsicality nor gross and patent abuse of discretion as would amount to an
evasion of a positive duty or a virtual refusal to perform a duty enjoined By law when the trial
court issued the assailed order and issued a writ of execution against herein petitioner who
voluntarily and freely signed the compromise agreement and thereafter became bound by the
terms and conditions that were embodied therein.

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DENYING the
petition filed in this case for lack of merit. The Order dated September 8,2011 issued by Branch
148 of the Regional Trial Court of the National Capital Judicial Region in Makati City dated
September 8, 2011 [sic] in Civil Case No. 09-217 is AFFIRMED.

SO ORDERED.15
In short, the CA held that petitioner's failure to abide by the terms and conditions of the
Compromise Agreement, which had the force and effect of a final and executory judgment when it
was approved by the trial court in its August 16,2010 Judgment, authorized the enforcement
thereof by execution, and thus the trial court may not be faulted for granting respondent's motion
for execution and directing the issuance of the corresponding writ.

Petitioner moved to reconsider, but in its assailed January 25, 2013 Resolution, the CA remained
unconvinced. Hence, the present Petition.

In an August 20, 2014 Resolution,16 this Court resolved to give due course to the Petition.

Issue

In essence, petitioner reiterates her contention before the CA that the trial court had no power to
issue a writ of execution in Civil Case No. 09-217 as the issuance thereof was not authorized and
specifically provided for in its August 16, 2010 Judgment.
Petitioner's Arguments

Praying that the assailed CA dispositions be voided, reversed, and set aside, petitioner argues that
respondent is not entitled to execution as the Compromise Agreement does not specifically provide
that in case of default, a writ of execution may issue; that the only remedies available to
respondent are to charge penalties and/or rescind the agreement as provided for under the
Contract to Sell; and that before a writ of execution may issue, respondent must first institute an
action for rescission and secure a judicial declaration that the Contract to Sell is rescinded, which
was not done in this case.

Respondent's Arguments

In its Comment,17 respondent counters that since petitioner admits that she is in default and thus
violated the terms of the Compromise Agreement, rescission should follow as a matter of course as
authorized and provided for in said agreement and the Contract to Sell; that the trial court's
approval of the Compromise Agreement is a final act that forms part and parcel of the judgment
which may be enforced by a writ of execution;18 that since the Compromise Agreement itself
provides the power to rescind, it follows that any rescission done pursuant thereto is enforceable
by execution without need of a separate action; and that since petitioner failed to prove the
presence of grave abuse of discretion, the C A is correct in dismissing her Petition for Certiorari.

Our Ruling

The Petition must be denied.

Under Article 2041 of the Civil Code, "(i)f one of the parties fails or refuses to abide by the
compromise, the other party may either enforce the compromise or regard it as rescinded and
insist upon his original demand." "The language of this Article 2041 x x x denotes that no action for
rescission is required x x x, and that the party aggrieved by the breach of a compromise
agreement may, if he chooses, bring the suit contemplated or involved in his original demand, as if
there had never been any compromise agreement, without bringing an action for rescission
thereof. He need not seek a judicial declaration of rescission, for he may 'regard' the compromise
agreement already 'rescinded'."19 This principle was reiterated in a subsequent case, thus: ChanRoblesVi rtua lawlib rary

In the case of Leonor v. Sycip, the Supreme Court (SC) had the occasion to explain this provision
of law. It ruled that Article 2041 does not require an action for rescission, and the aggrieved party,
by the breach of compromise agreement, may just consider it already rescinded, to wit: ChanRoble sVi rt ualawlib ra ry

It is worthy of notice, in this connection, that, unlike Article 2039 of the same Code, which speaks
of "a cause of annulment or rescission of the compromise" and provides that "the compromise may
be annulled or rescinded" for the therein specified, thus suggesting an action for annulment or
rescission, said Article 2041 confers upon the party concerned, not a "cause" for rescission, or the
right to "demand" the rescission of a compromise, but the authority, not only to "regard it as
rescinded", but, also, to "insist upon his original demand". The language of this Article 2041,
particularly when contrasted with that of Article 2039, denotes that no action for
rescission is required in said Article 2041, and that the party Aggrieved by the breach of
a compromise agreement may, if he chooses, bring the suit contemplated or involved in
his original demand, as if there had never been any compromise agreement, without
bringing an action for rescission thereof. He need not seek a judicial declaration of
rescission, for he may "regard" the compromise agreement already "rescinded".20
The parties' Compromise Agreement states that -
(c) Perialty. In case of failure of the plaintiff to pay, for any reason whatsoever, the amount
provided in the Schedule of Payment, the plaintiff hereby agrees to pay, in addition to, and
separate from, the interest rate agreed upon, a penalty charge of FIVE PERCENT (5%) per month
or a fraction thereof, based on unpaid installments computed from due date until fully paid. This
shall be without prejudice to the right of the defendant to rescind this Compromise
Agreement as provided under the "Contract to Sell" dated 21 December 2007 upon
compliance with the requirements provided for under the law. (Emphasis supplied)
The Contract to Sell provides, on the other hand, that -
The failure of the BUYER to pay on due date any monthly installment in'accordance with the
Schedule of Payment provided in Paragraph 2 - Manner of payment, or if, at any time, the SELLER
is of the opinion that the BUYER would be unable to pay or meet his obligations under this Contract
or in case the BUYER was declared in default by any other creditor, then the SELLER shall be
entitled, as a matter of right, to rescind this Contract. (Emphasis supplied)
While the assailed dispositions of the trial court and the CA do not specify the remedies that
respondent is entitled to, it is clear that rescission and eviction were specifically sought and prayed
for in respondent's Manifestation and Motion for Execution, and petitioner was given the
opportunity to oppose the same. In her Opposition to the Motion for Execution,21 she in fact
acknowledged and admitted that she was in default and that she violated the Compromise
Agreement by her failure to make regular payments as required therein. Indeed, it may be said
that respondent's motion for execution, with a prayer for rescission, for the of petitioner's
payments as rental, and for her eviction, constituted sufficient written notice to petitioner, and it
was duly heard; petitioner opposed the motion and even filed a rejoinder22 to respondent's
reply,23 but she could not proffer any defense; quite the opposite, she openly admitted liability. The
facts, evidence, and pleadings are clear and within the cognizance of the trial court; petitioner's
failure to abide by the agreement should result in execution, cancellation and rescission of the
Compromise Agreement and Contract to Sell, and her eviction from the property.
Certainly, a compromise agreement becomes the law between the parties and will not He set aside
other than [sic] the grounds mentioned above. In Ramnani v. Cburt of Appeals,we held that the
main purpose of a compromise agreement is to put an end to litigation because of the uncertainty
that may arise from it. Once the compromise is perfected, the parties are bound to abide by it in
good faith. $hould a party fail or refuse to comply with the terms of a compromise of amicable
settlement, the other party could either enforce the compromise by a writ of execution or regard it
as rescinded and so insist upon his/her original, demand.24
Petitioner may be right in arguing that respondent has the option to proceed with the sale and
charge corresponding penalties instead, pursuant to the stipulations in the Contract to Sell;
however, respondent chose to rescind the same, an option which it is equally entitled to by
contract and under the law,25 and thus evict petitioner frotn the premises. Respondent must have
cralaw red

thought that if past actions were a gatige, petitioner was no longer in a position to honor her
obligations under trje Contract to Sell.

Respondent claim is straightforward: it seeks rescission and eviction, with whatever amount fiaid
by petitioner to be applied as rental for the use and occupation of the subject property as agreed
upon. Going by what is on record, it would appear that petitioner paid the total amount of
P497,412.76,26 while she has been occupying tjie property, a 126.5-square meter parcel of land
with improvements thereon located at Timex Street, West Fairview, Quezon City, as her residence
since 2007.27 In effect, petitioner would have paid a measly sum as aggregate rent for her stay
therein, which is more than just for her.

WHEREFORE, the Petition is DENIED. The August 28, 2012 Decision and January 25, 2013
Resolution of the Court of Appeals in CA-G.R. SP No. 122409 are AFFIRMED. The parties'
Compromise Agreement and Contract to Sell dated December 21, 2007
are RESCINDED. Petitioner Conchita A. Sonley is ordered to immediately VACATE the subject
property and premises and SURRENDER the same to respondent Anchor Savings Bank/Equicom
Savings Bank.

SO ORDERED. chanRoblesvirt ual Lawlib rary

Carpio, (Chairperson), and Leonen, JJ., concur.

Brion,* J., On leave.
Mendoza,** J., On official leave.

Endnotes:

Republic of the Philippines

 Supreme Court
Manila

THIRD DIVISION

VIRGILIO MAQUILAN, G.R. NO. 155409

Petitioner,
Present:

YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and
NACHURA, JJ.
DITA MAQUILAN, Promulgated:
Respondent. June 8, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule

45 of the Rules of Court assailing the Decision [ 1] dated August 30, 2002
promulgated by the Court of Appeals (CA) in CA -G.R. SP No. 69689,
which affirmed the Judgment on Compromise Agreement dated January
2, 2002 of the Regional Trial Court (RTC), Branch
3, Nabunturan, Compostela Valley, and the RTC Orders dated January
21, 2002 and February 7, 2002 (ORDERS) in Civil Case No. 656.

The facts of the case, as found by the CA, are as follows:

Herein petitioner and herein private respondent are spouses who once
had a blissful married life and out of which were blessed to have a
son. However, their once sugar coated romance turned bitter when
petitioner discovered that private respondent was having illicit
sexual affair with her paramour, which thus, prompted the petitioner
to file a case of adultery against private respondent and the latters
paramour. Consequentl y, both the private respondent and her
paramour were convi cted of the crime charged and were sentenced to
suffer an imprisonment ranging from one (1) year, eight (8) months,
minimum of prisioncorreccional as minimum penalt y, to three (3)
years, six (6) months and twent y one (21) days, medium
of prision correccion al as maximum penalty.

Thereafter, private respondent, through counsel, filed a Petition for

Declaration of Nullity of Marriage, Dissolution and Liquidation of
Conjugal Partnership of Gains and Damages on June 15, 2001 with
the Regional Trial Court, Branch 3
of Nabunturan, Compostela Valley, docketed as Civil Case No. 656,
imputing psychological incapacit y on the part of the petitioner.

During the pre -trial of the said case, petitioner and private
respondent entered into a COMPROMISE AGREEMENT in th e
following terms, to wit:

1. In partial settlement of the conj ugal partnership of gains,

the parties agree to the following:

a. P 5 0 0 ,0 0 0 .0 0 o f t he mo ne y d ep o s it ed i n t h e b a n k
j o int l y i n t h e na me o f t he sp o u se s s ha ll b e
wi t h d r a wn a nd d ep o si te d in fa vo r a nd i n tr u st o f
th eir co m mo n c h ild , Nei l M aq ui la n, wi t h t he
d ep o s it i n t h e j o i nt ac co u nt o f t h e p ar ti es .

T he b ala n ce o f s u c h d ep o s it, wh ic h p r es e nt l y
st a nd s a t P 1 ,3 1 8 ,0 4 3 .3 6 , s hal l b e wi t hd ra wn a nd
d iv id ed eq ua ll y b y t he p arti es ;

b. T he sto r e t ha t is no w b e i n g o cc up ied b y t he
p lai n ti f f s h al l b e a llo tt e d to her wh i le t h e b o d e ga
s ha ll b e fo r t he d e fe nd a nt . T he d e fe nd a n t s ha ll b e
p aid t he s u m o f P 5 0 ,0 0 0 .0 0 as h i s s ha re i n t he
sto c ks o f t h e sto re i n fu l l s et tl e me n t t he reo f.

T he p lai n ti f f s ha ll b e al l o wed to o cc up y t he b o d e ga
u nt il t he t i me t h e o wn er o f t h e lo t o n wh i c h i t
st a nd s s h al l co n str u ct a b ui ld i n g t he reo n;

c. T he mo to r c yc le s s ha ll b e d i vid ed b e t we e n t h e m s uc h
th at t he Ka wa s a ki s h al l b e o wn ed b y t he p la i nt i ff
wh i le t h e H o nd a Drea m s ha ll b e fo r t he d e fe nd a nt ;
 d . T he p assenger j eep shall b e fo r the p laintiff wh o
s ha ll p a y t h e d e fe n d a nt t he s u m o f P 7 5 ,0 0 0 .0 0 as
hi s s h ar e t her eo n a nd i n fu ll se tt le me n t t hereo f;

e. T he ho u s e a nd lo t s ha ll b e to t he co m mo n c h il d .

2. This settlement is only partial, i.e., without prej udice to

the litigation of other conj ugal properties t hat have
not been mentioned;

x x x x

The said Compromise Agreement was given judicial imprimatur b y

the respondent judge in the assailed Judgment On Compromise
Agreement, which was erroneousl y dated January 2, 2002. [ 2 ]

However, petitioner filed an Omnibus Motion dated January 15,

2002, praying for the repudiation of the Compromis e Agreement and
the reconsideration of the Judgment on Compromise Agreement by
the respondent judge on the grounds that his previous lawyer did not
intelligentl y and judiciousl y apprise him of the consequential effects
of the Compromise Agreement.

The respondent Judge in the assailed Order dated January 21, 2002,
denied the aforementioned Omnibus Motion.

Displeased, petitioner filed a Motion for Reconsideration of the

aforesaid Order, but the same was denied in the assailed Order
dated February 7, 2002. [ 3 ] (Emphasis supplied)

The petitioner filed a Petition for Certiorari and Prohibition with the
CA under Rule 65 of the Rules of Court claiming that the RTC
committed grave error and abuse of discretion amounting to lack or
excess of jurisdiction (1) in upholding the validity of the Compromise
Agreement dated January 11, 2002; (2) when it held in its Order dated
February 7, 2002 that the Compromise Agreement w as made within the
cooling-off period; (3) when it denied petitioners Motion to Repudiate
Compromise Agreement and to Reconsider Its Judgment on Compromise
Agreement; and (4) when it conducted the proceedings without the
appearance and participation of the Office of the Solicitor General
and/or the Provincial Prosecutor. [ 4]
On August 30, 2002, the CA dismissed the Petition for lack of
merit. The CA held that the conviction of the respondent of the crime
of adultery does not ipso facto disqualify her from sharing in the
conjugal property, especially considering that she had only been
sentenced with the penalty of prisioncorreccional, a penalty that does
not carry the accessory penalty of civil interdiction which deprives the
person of the rights to manage her property and to dispose of such
property inter vivos; that Articles 43 and 63 of the Family Code, which
pertain to the effects of a nullified marriage and the e ffects of legal
separation, respectively, do not apply, considering, too, that the Petition
for the Declaration of the Nullity of Marriage filed by the respondent
invoking Article 36 of the Family Code has yet to be decided, and,
hence, it is premature to apply Articles 43 and 63 of the Family Code;
that, although adultery is a ground for legal separation, nonetheless,
Article 63 finds no application in the instant case since no petition to
that effect was filed by the petitioner against the respondent; tha t the
spouses voluntarily separated their property through their Compromise
Agreement with court approval under Article 134 of the Family Code;
that the Compromise Agreement, which embodies the voluntary
separation of property, is valid and binding in all respects because it
had been voluntarily entered into by the parties; that, furthermore, even
if it were true that the petitioner was not duly informed by his previous
counsel about the legal effects of the Compromise Agreement, this point
is untenable since the mistake or negligence of the lawyer binds his
client, unless such mistake or negligence amounts to gross negligence
or deprivation of due process on the part of his client; that these
exceptions are not present in the instant case; that the Compromi se
Agreement was plainly worded and written in simple language, which a
person of ordinary intelligence can discern the consequences thereof,
hence, petitioners claim that his consent was vitiated is highly
incredible; that the Compromise Agreement was mad e during the
existence of the marriage of the parties since it was submitted during
the pendency of the petition for declaration of nullity of marriage; that
the application of Article 2035 of the Civil Code is misplaced; that the
cooling-off period under Article 58 of the Family Code has no bearing
on the validity of the Compromise Agreement; that the Compromise
Agreement is not contrary to law, morals, good customs, public order,
and public policy; that this agreement may not be later disowned simply
because of a change of mind; that the presence of the Solicitor General
or his deputy is not indispensable to the execution and validity of the
Compromise Agreement, since the purpose of his presence is to curtail
any collusion between the parties and to see t o it that evidence is not
fabricated, and, with this in mind, nothing in the Compromise
Agreement touches on the very merits of the case of declaration of
nullity of marriage for the court to be wary of any possible collusion;
and, finally, that the Compro mise Agreement is merely an agreement
between the parties to separate their conjugal properties partially
without prejudice to the outcome of the pending case of declaration of
nullity of marriage.
Hence, herein Petition, purely on questions of law, raisin g the following
issues:

I.

WHETHER OF NOT A SPOUSE CONVICTED OF EITHER

CONCUBINAGE OR ADULTERY, CAN STILL SHARE IN THE
CONJUGAL PARTNERSHIP;

II

WHETHER OR NOT A COMPROMISE AGREEMENT ENTERED

INTO BY SPOUSES, ONE OF WHOM WAS CONVICTED OF
ADULTERY, GIVING THE CONVICTED SPOUSE A SHARE IN
THE CONJUGAL PROPERTY, VALID AND LEGAL;

III

WHETHER OR NOT A JUDGMENT FOR ANNULMENT AND

LEGAL SEPARATION IS A PRE -REQUIS ITE BEFORE A SPOUSE
CONVICTED OF EITHER CONCUBINAGE OR ADULTERY, BE
DISQUALIFIED AND PROHIBITED FROM SHARING IN THE
CONJUGAL PROPERTY;

IV

WHETHER OR NOT THE DISQUALIFIC ATION OF A CONVICTED

SPOUSE OF ADULTERY FROM SHARING IN A CONJUGAL
PROPERTY, CONSTITUTES CIVIL INTERDICTION. [ 5 ]
The petitioner argues that the Compromise Agreement should not
have been given judicial imprimatur since it is against law and
public policy; that the proceedi ngs where it was approved is null
and void, there being no appearance and participation of the
Solicitor General or the Provincial Prosecutor; that it was timely
repudiated; and that the respondent, having been convicted of
adultery, is therefore disqualified from sharing in the conjugal
property.
The Petition must fail.
The essential question is whether the partial voluntary separation of
property made by the spouses pending the petition for declaration of
nullity of marriage is valid.

First. The petitioner contends that the Compromise Agreement is void

because it circumvents the law that prohibits the guilty spouse, who was
convicted of either adultery or concubinage, from sharing in the
conjugal property. Since the respondent was convicted of adultery, the
petitioner argues that her share should be forfeited in favor of the
common child under Articles 43(2) [ 6] and 63 [ 7 ] of the Family Code.

To the petitioner, it is the clear intention of the law to disqualify the

spouse convicted of adultery from sharing in the conjugal propert y; and
because the Compromise Agreement is void, it never became final
and executory.
Moreover, the petitioner cites Article 2035 [ 8 ] of the Civil Code and
argues that since adultery is a ground for legal separation, the
Compromise Agreement is therefore void.

These arguments are specious. The foregoing provisions of the law are
inapplicable to the instant case.

Article 43 of the Family Code refers to Article 42, to wit:

Article 42. The subsequent marriage referred to in the preceding

Article [ 9 ] shall be automaticall y terminated by the recording of the
 affidavit of reappearance of the absent spouse, unless there is a
judgment annulling the previous marriage or declaring it
void ab initio.

A sworn statement of the fact and circumstances of reappearance

shall be recorded in the civil registry of the residence of the parties
to the subsequent marriage at the instance of any interested person,
with due notice to the spouses of the subsequent marriage and without
prejudice to the fact of reappea rance being judiciall y determined in
case such fact is disputed.

where a subsequent marriage is terminated because of the reappearance

of an absent spouse; while Article 63 applies to the effects of a decree
of legal separation. The present case involves a proceeding where the
nullity of the marriage is sought to be declared under the ground of
psychological capacity.

Article 2035 of the Civil Code is also clearly inapplicable. The

Compromise Agreement partially divided the properties of the conjugal
partnership of gains between the parties and does not deal with the
validity of a marriage or legal separation. It is not among those that are
expressly prohibited by Article 2035.
Moreover, the contention that the Compromise Agreement is tantamount
to a circumvention of the law prohibiting the guilty spouse from sharing
in the conjugal properties is misplaced. Existing law and jurisprudence
do not impose such disqualification.

Under Article 143 of the Family Code, separation of property may be

effected voluntarily or for sufficient cause, subject to judicial
approval. The questioned Compromise Agreement which was judicially
approved is exactly such a separation of property allowed under the
law. This conclusion holds true even if the proceedings for the
declaration of nullity of marriage was still pending. However, the
Court must stress that this voluntary separation of property is
subject to the rights of all creditors of the conjugal partnership of
gains and other persons with pecuniary interest pursuant t o Article
136 of the Family Code.
Second. Petitioners claim that since the proceedings before the RTC
were void in the absence of the participation of the provincial
prosecutor or solicitor, the voluntary separation made during
the pendency of the case is also void. The proceedings pertaining to the
Compromise Agreement involved the conjugal properties of the
spouses. The settlement had no relation to the questions surrounding the
validity of their marriage. Nor did the settlement amount to a
collusion between the parties.

Article 48 of the Family Code states:

Art. 48. In all cases of annulment or declaration of absolute nullit y

of marriage, the Court shall order the prosecuting attorney or fiscal
assigned to it to appear on behalf of the State to take s teps to prevent
collusion between the parties and to take care that the evidence is
not fabricated or suppressed. (Emphasis supplied)
Section 3(e) of Rule 9 of the 1997 Rules of Court provides:

SEC. 3. Default; declaration of. - x x x x

x x x x

(e) Where no defaults allowed. If the defending part y in action

for annulment or declaration of nullit y of marriage or for legal
separation fails to answer, the court shall order the prosecuting
attorney to investigate whether or not a collusion between the
parties exists if there is no collusion, to intervene for the State in
order to see to it that the evidence submitted is not
fabricated. (Emphasis supplied

Truly, the purpose of the active participation of the Public Prosecutor

or the Solicitor General is to ensure that the interest of the State is
represented and protected in proceedings for annulment and declaration
of nullity of marriages by preventing collusion between the parties, or
the fabrication or suppression of evidence. [ 1 0 ] While the appearances of
the Solicitor General and/or the Public Prosecutor are mandatory, the
failure of the RTC to require their appearance does not per se nullify
the Compromise Agreement. This Court fully concurs with the findings
of the CA:
 x x x. It bears emphasizing that the intendment of the law in
requiring the presence of the Solicitor General and/or State
prosecutor in all proceedings of legal separation and annulment or
declaration of nullity of marriage is to curtail or prevent any
possibilit y of collusion between the parties and to see to it that their
evidence respecting the case is not fabricated. In the instant case,
there is no exigency for the presence of the Soli citor General and/or
the State prosecutor because as already stated, nothing in the subject
compromise agreement touched into the very merits of the case of
declaration of nullity of marriage for the court to be wary of an y
possible collusion between the p arties. At the risk of
being repetiti[ve], the compromise agreement pertains merely to an
agreement between the petitioner and the private respondent to
separate their conjugal properties partially without prejudice to the
outcome of the pending case of de claration of nullit y of marriage. [ 1 1 ]

Third. The conviction of adultery does not carry the accessory of civil
interdiction. Article 34 of the Revised Penal Code provides for the
consequences of civil interdiction:

Art. 34. Civil Interdiction. Civil interdiction shall deprive the

offender during the time of his sentence of the rights of parental
authorit y, or guardianship, either as to the person or propert y of any
ward, of marital authorit y, of the right to manage his propert y and of
the right to dispose of such property by any act or any
conveyance inter vivos.
Under Article 333 of the same Code, the penalty for adultery
is prision correccional in its medium and maximum periods. Article
333 should be read with Article 43 of the same Code. The latter
provides:

Art. 43. Prision correccional Its accessory penalties. The penalt y

of prision correccional shall carry with it that of suspension from
public office, from the right to follow a profession or calling, and
that of perpetual special disqualification from the right of suffrage,
if the duration of said imprisonment shall exceed eighteen
months. The offender shall suffer the disqualification provided in
this article although pardoned as to the principal penalt y, unless the
same shall have been expressl y remitted in the pardon.

It is clear, therefore, and as correctly held by the CA, that the crime of
adultery does not carry the accessory penalty of civil int erdiction which
deprives the person of the rights to manage her property and to dispose
of such property inter vivos.

Fourth. Neither could it be said that the petitioner was not intelligently
and judiciously informed of the consequential effects of the compromise
agreement, and that, on this basis, he may repudiate the Compromise
Agreement. The argument of the petitioner that he was not duly
informed by his previous counsel about the legal effects of the voluntary
settlement is not convincing. Mistake or vitiation of consent, as now
claimed by the petitioner as his basis for repudiating the settlement,
could hardly be said to be evident. In Salonga v. Court of
Appeals, [ 1 2] this Court held:

[I]t is well-settled that the negligence of counsel binds the

client. This is based on the rule that any act performed by a lawyer
within the scope of his general or implied authorit y is regarded as an
act of his client. Conse quentl y, the mistake or negligence of
petitioners' counsel may result in the rendition of an unfavorable
judgment against them.

Exceptions to the foregoing have been recognized by the Court in

cases where reckless or gross negligence of counsel deprives the
client of due process of law, or when its application "results in the
outright deprivation of one's propert y through a technicalit y."
x x x x[13]

None of these exceptions has been sufficiently shown in the present

case.

WHEREFORE, the Petition is DENIED. The Decision of the Court of

Appeals is AFFIRMED with MODIFICATION that the subject
Compromise Agreement is VALID without prejudice to the rights of all
creditors and other persons with pecuniary interest in the properties of
the conjugal partnership of gains.

SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice
 WE CONCUR:

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson

MINITA V. CHICO-NAZARIO ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division
Chairpersons attestation, it is hereby certified that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer
of the opinion of the Courts Division.

LEONARDO A. QUISUMBING
Acting Chief Justice
[1]
P e n n ed b y As so cia te J us ti ce B i e n ve n id o L. Re ye s , wi t h As so ci ate J u st ice s Ro b ert o A.
B arr io s ( no w d ec ea sed ) and Ed gard o F. S u nd ia m , co nc urr i n g.
[2]
T he Co mp r o mi s e Ag r ee me n t i s d ated J a n uar y 1 1 , 2 0 0 2 .
[3]
Ro l lo , p p . 2 9 -3 1 .
[4]
Ro l lo , p . 3 2 .
[5]
Ro l lo , p p . 1 9 -2 0 .
[6]
Art ic le 4 3 r ead s:
Art. 4 3 . T he t er mi n at io n o f t he s ub s eq ue nt marr i ag e re ferred to i n t he p r e ced i n g Ar tic le
s ha ll p r o d u ce t he fo llo win g e ffe ct s :
x x x x
(2 ) T he ab so l ute co m mu ni t y o f p ro p ert y o r t he c o nj u gal p art n ers h ip , a s t he ca se
ma y b e, s h al l b e d i sso l v ed and liq u id at ed , b ut if eith er spo u se co ntra ct ed sa i d
ma rr ia g e i n ba d f a it h, hi s o r h er s ha re o f t he net p ro fit s o f th e co mmu n i ty
pro pert y o r co n j ug a l p a rt n e r sh ip pro pe rty s h a ll b e fo rfe ite d i n fa v o r o f the
co mmo n ch il dr en o r , i f t her e ar e no n e, t he c h i ld re n o f t he g ui lt y s p o u se b y
a p re vio u s mar r i a ge o r i n d e fa ul t o f c hi ld re n, t h e i n no c e nt sp o u se ;
x x x x (emphasis supplied)
[7]
Art ic le 6 3 r ead s:
Art. 6 3 . T he d ecr ee o f l eg al sep ara tio n s ha ll ha ve t he fo l lo wi n g e ffect s :
x x x x
(2 ) T he ab so l u te co m mu ni t y o r t h e co nj u g al p art ner s h ip s h a l l b e di s so lv ed a nd
li qu i da t e d but t h e o f f e nd i ng spo u se s ha l l ha v e no rig ht to a ny s ha r e o f th e
net pro f it s ea r ne d by t he a b so l ute c o mmu n ity o r th e co njug a l pa rt n ers h ip,
w hic h s hal l b e fo r fe ited i n ac co rd a n ce wi t h t h e p ro v is io n s o f Art icl e 4 3 (2 );
x x x x ( e mp h as i s s up p l i ed )
[8]
Art ic le 2 0 3 5 r ead s:
Art. 2 0 3 5 . No co mp r o mi se up o n t he fo ll o wi n g q ue s tio n s s ha ll b e va lid :
( 1 ) T he c i vi l st at u s o f p erso n s;
( 2 ) T he v a li d it y o f a ma rria g e o r a leg a l se pa ra tio n;
( 3 ) A ny g ro un d f o r l eg a l s epa ra tio n;
( 4 ) F u t ur e s up p o r t ;
( 5 ) T he j ur i sd i ct io n o f c o ur ts ;
( 6 ) F u t ur e le gi ti me. ( 1 8 1 4 a)
( e mp ha si s s up p l ied )
[9]
Art ic le 4 1 r ead s:
Art. 4 1 . A ma r r i a ge c o nt r ac ted b y a n y p er so n d u ri n g t he s ub s i ste n ce o f a
p rev io u s ma r r ia g e s ha ll b e n ul l a nd vo id , u nl es s b e fo re t he cel eb ra tio n o f t h e
s ub seq ue n t mar r ia ge , t he p r io r sp o u se had b ee n a b se n t fo r fo ur co n sec u ti v e year s
and t h e sp o u se p r e se n t had a we ll - fo u nd ed b el i ef t h at t h e ab se n t sp o u se wa s
alre ad y d ead . I n c as e o f d is ap p ear a nce wh er e t h e re i s d a n g er o f d e at h u n d er t he
circ u ms t a nc es se t fo r t h in t he p ro vi s io ns o f Ar t icl es 3 9 1 o f t he C i vil C o d e, a n
ab se n ce o f o nl y t wo ye a r s s ha ll b e s u ffi cie n t.
Fo r t he p ur p o se o f co n tr ac ti n g t he s ub seq u e nt marri a ge u nd er t he p r eced i n g
p ara gr ap h, t h e sp o u se p r ese n t mu s t i n st it u te a s u m ma r y p ro cee d i n g as p r o vi d ed
in t h i s Co d e fo r t he d ec lar a tio n o f p re s u mp ti v e d eat h o f t h e ab s e nte e, wi t h o ut
p rej ud i ce to t h e e f f ect o f r eap p e ara nc e o f t he ab se n t sp o us e.
[10]
S ee R ep u b l ic v. Cu i s o n - Me lg a r , G. R . No . 1 3 9 6 7 6 , Mar c h 3 1 , 2 0 0 6 , 4 8 6 S C R A 1 7 7 , 1 8 7 .
[11]
Ro l lo , p . 3 9 .
[12]
3 3 6 P hi l. 5 1 4 ( 1 9 9 7 ) .
[13]
Id . at 5 2 6 -5 2 7 .
 SECOND DIVISION

G.R. No. 144732 February 13, 2006

ROLANDO LIMPO, Petitioner,

vs.
COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY, Respondents.

DECISION

AZCUNA, J.:

For consideration in this petition for review are the resolutions of the Court of Appeals in CA-G.R. CV
No. 45821 dated April 5, 2000 and August 30, 2000, respectively.

Both parties have accepted the factual account narrated by the Court of Appeals1 and have
identically quoted the portion of the assailed decision pertaining thereto in their memoranda.
Accordingly, the Court adopts said findings, which are reproduced as follows:

On November 11, 1980, plaintiff Security Bank & Trust Company filed a complaint for a Sum of
Money with the Regional Trial Court of Pasig, Branch 158 entitled "Security Bank & Trust Company,
plaintiff, - versus – Miguel F. Uy, Brigitte E. Uy and Rolando Limpo, defendants[.]" Plaintiff Bank
sought to recover the outstanding balance of a promissory note executed by the defendants.

On February 1, 1983, defendants-spouses Miguel F. Uy and Brigitte Uy entered into a Compromise

Agreement with plaintiff bank. On March 22, 1983, the trial court rendered decision, reproducing
therein the pertinent provisions of the Compromise Agreement as follows:

"1. Defendant spouses admit liability to the plaintiff the said amount of ₱38,833.44 as of
January 12, 1983;

2. Defendant spouses agree to pay the plaintiff the said amount of ₱38,833.44 with interest
at the rate of 20% per annum with aforesaid interest rate computed based on declining
balance, from January 12, 1983 in the following manner:

a) ₱4,644.00 on or before March 14, 1983 of which ₱500.00 shall be applied as

attorney’s fee; ₱144.00 the cost of suit, and the remaining balance to the outstanding
loan obligation;
 b) ₱4,000.00 each on or before the 15th day of each month commencing April 1983
until June 1, 1983;

c) ₱1,500.00 on or before the 15th day of each month commencing July 1983 until
the balance and accruing interest thereon is fully paid.

3. In case of failure to pay any installment when due, the whole balance shall become due
and payable, without necessity of demand and defendant spouses shall be assessed a
default penalty of 3% per month until the obligation is fully paid. Moreover, plaintiff shall be
entitled to a writ of execution upon ex-parte motion." (RTC Decision, p. 1)

When defendants failed to comply with the terms and conditions of the compromise agreement,
plaintiff bank, on November 27, 1984, filed an Ex-Parte Motion for the Issuance of Writ of Execution.
The motion not having been acted upon, plaintiff bank, on July 22, 1992, filed a complaint for Revival
of Judgment.

The defendant-spouses, in their Answer, alleged as their defense laches, for failure of plaintiff bank
to enforce its rights for more than eight (8) years. Defendant Limpo, on the other hand, alleged that
"he is not obligated to pay any amount to plaintiff under the said compromise agreement which was
entered into only by and between plaintiff and defendant spouses Miguel F. Uy and Brigitte E. Uy
without his knowledge and consent." (Records, p. 31)

On February 5, 1993, plaintiff bank filed a Motion for Judgment on the Pleadings alleging that
defendants spouses’ Answer failed to tender genuine issues. On April 20, 1993, the trial court issued
an order against defendants spouses ordering them to pay plaintiff bank the amount of ₱38,833.44
with interest at the rate of 20% per annum computed from January 12, 1983 until the amount is fully
paid. Defendant-spouses appealed this decision to the Court of Appeals, but said appeal was
ordered dismissed by this Court’s Special Fifth Division for defendants spouses’ abuse of the
extensions of time granted them, pursuant to Section 1 (f) of Rule 50 of the Rules of Court
(Rollo, p. 84).

Meanwhile, on June 30, 1993, defendant Limpo filed a Manifestation and Motion praying for the
dismissal of the complaint on the ground that the judgment sought to be revived did not include
defendant Limpo. After responsive pleadings were filed by the parties, the trial court issued an Order
dated November 3, 1993 dismissing the complaint against defendant Limpo. This Order was
reiterated by the trial court in the Order dated April 19, 1994 which likewise dismissed defendant
Limpo’s compulsory counterclaim.

Not satisfied with the Order of the trial court, plaintiff bank filed the appeal at bench.

Plaintiff-appellant Security Bank & Trust Company assails the Order of the trial court on the basis of
the sole assigned error, to wit:

"THE LOWER COURT ERRED IN DISMISSING THE INSTANT COMPLAINT AGAINST

DEFENDANT-APPELLANT ROLANDO LIMPO." (Appellant’s Brief, p. 3)

At first, the Court of Appeals dismissed the appeal holding that the Compromise Agreement had
superseded the promissory note executed between the payee Security Bank & Trust Company (the
Bank) and the makers spouses Miguel F. Uy and Brigitte E. Uy (spouses Uy) and Rolando Limpo
(Limpo). Limpo, inasmuch as he was never a party to the new agreement, was held to be not bound
by its terms and, therefore, was no longer obligated to the Bank. Upon the Bank’s motion for
reconsideration, however, the Court of Appeals reversed itself and ordered the continuation of
proceedings in Civil Case No. 62226 against Limpo.

In this petition, Limpo presents the following issues to be resolved:2

1. Whether Rolando Limpo is bound under the Compromise Agreement entered into by
Security Bank Corporation and defendants Miguel Uy and Brigitte Uy.

2. Whether Rolando Limpo is liable to Security Bank Corporation under the trial court’s
judgment dated March 22, 1983 which was based on the Compromise Agreement entered
into by Security Bank and the defendants Miguel Uy and Brigitte Uy.

3. Whether the action by Security Bank against Rolando Limpo, as co-maker of defendants
Miguel Uy and Brigitte Uy, [was] already barred by prescription when the action for revival of
judgment was filed on July 22, 1992.

Anent the first two issues, Limpo takes for the negative. He maintains that the Compromise
Agreement was executed without his participation and so the trial court’s judgment based on
compromise, by obvious consequence, did not and could not have included him as a judgment
debtor. Under this circumstance, there would be no basis to include him as a defendant in a
complaint for revival of judgment.

With respect to the second issue, Limpo answers in the affirmative. He avers that an action based
on the promissory note, being a written contract, prescribes in ten years. Continuing from this
premise, he computes that the right of action under the promissory note accrued when it became
due and demandable on September 19, 1979 and was suspended upon institution of the action to
collect on the note on November 11, 1980. By then, one year, one month and twenty-three days had
elapsed. The period began to run again on March 22, 1983, when the judgment approving the
Compromise Agreement was issued, and was tolled upon the filing of the complaint for revival of
judgment on July 22, 1992. This next interval adds up to approximately nine years and four months.
Add this to the first interval, the total period that had run would already be ten years and five months,
making any suit on the promissory note barred by prescription.

The Court finds the petition meritorious. 1avvphil.net

It is settled that a compromise agreement cannot bind persons who are not parties to it.3 This rule is
based on Article 1311(1) of the Civil Code which provides that "contracts take effect only between
the parties, their assigns and heirs x x x." The sound reason for the exclusion of non-parties to an
agreement is the absence of a vinculum or juridical tie which is the efficient cause for the
establishment of an obligation. In the Compromise Agreement that was presented to the trial court,
there is no question that only the spouses Uy and the Bank were parties. Limpo did not participate in
its execution and there was no reference to him in any of its provisions. He cannot be bound by the
Compromise Agreement.

What happens then if the court approves a compromise agreement that fails to include all of the
defendants? In approving a compromise agreement, no court can impose upon the parties a
judgment different from their real agreement or against the very terms and conditions of the
amicable settlement entered into.4 The principle of autonomy of contracts must be respected.5 These
being said, considering that the Compromise Agreement imposed no obligation upon Limpo, it
follows that the judgment rendered by the Regional Trial Court (RTC) of Pasig, based on the
Compromise Agreement, could likewise not impose any obligation upon him. The duty of the court is
confined to the interpretation of the agreement that the contracting parties have made for
themselves without regard to its wisdom or folly as the court cannot supply material stipulations or
read into the contract words which it does not contain.6 Consequently, the contention of Limpo is
correct. The terms and conditions set forth in the Compromise Agreement, as approved by the court,
are controlling7 and, therefore, there is no basis to include him in reviving the judgment.

However, there remains the question of whether the Bank may still continue the proceedings against
Limpo in Civil Case No. 62226, as concluded by the Court of Appeals.

The Court of Appeals gives the following reason:

x x x If the spouses Uy would become insolvent and could not pay their obligation under the
Compromise Agreement, the SBTC [the Bank] could collect the whole amount of the obligation from
defendant Rolando Limpo. A judgment, therefore, against Rolando Limpo would not be incompatible
with the existence of the Compromise Agreement for in such a situation SBTC could exercise its
option to secure execution of judgment against either or both the Uys and Limpo. The only limitation
is that SBTC could not collect more than the total amount of indebtedness.

The sound reasoning of the Court of Appeals as to the liabilities of a solidary debtor is correct.
However, it failed to consider two important incidents that make this case distinct: 1) a judgment had
been rendered excluding Limpo; and 2) such judgment had become final.

A compromise agreement once approved by order of the court becomes immediately final and
executory with the force of res judicata.8 The court’s sanction imbues it with the same effect as any
other judgment.9 No doubt that as to the spouses Uy, there was a clear declaration of liability.
Debate arises with respect to Limpo who was never mentioned in both the agreement and the
judgment despite that fact that he was impleaded as a defendant. How should this omission affect
him?

Judicial precedent as to the implication of a judgment approving a compromise agreement that fails
to expressly mention or include all the defendants is found in Bopis v. Provincial Sheriff of
Camarines Norte,10 the facts of which are akin to those of this case. There, four defendants, Camino,
Eco, Guadalupe and Bopis, were sued by the plaintiff for recovery of possession of real property.
Later, a compromise agreement was executed among Camino, Eco and the plaintiff, whereby
Camino and Eco agreed to pay the plaintiff a sum of money. The compromise agreement was later
approved by the trial court. Camino and Eco, however, failed to pay the entire amount and, as a
result, a writ of execution was issued against all four defendants. Guadalupe and Bopis questioned
their inclusion in the writ of execution since the judgment approving the agreement did not include
them. This Court found their contention meritorious and declared the writ of execution null and void
with respect to Guadalupe and Bopis. Quoting from the Decision:

As will be seen, only Rufina Camino and Pasto Eco were adjudged to pay Alfonso Ortega the
amount of ₱140.00 on February 28, 1951. Although they were included as party defendants, the
spouses Fermin Bopis and Emilia Guadalupe were not ordered to pay Alfonso Ortega. Obviously,
they were absolved from liability. Accordingly, as to them, there was nothing to execute since they
have been absolved from liability.

The Court, in that case, ostensibly concluded that a decision that fails to expressly mention the
liability of one of the defendants will be taken to mean that he has been absolved in that case. From
this pronouncement, the failure to mention Limpo in the judgment of the RTC of Pasig will
correspondingly mean his absence of liability to the Bank. As this implied declaration became final
with the approval of the Compromise Agreement, the Court of Appeals’ instructions to continue the
proceedings against Limpo in Civil Case No. 62226 amount to an alteration of a matter that is
already res judicata.

Since Limpo is no longer liable to the Bank, the issue of prescription is not necessary to resolve.

WHEREFORE, the resolutions of the Court of Appeals dated April 5, 2000 and August 30, 2000 in
CA-G.R. CV No. 45821 are hereby REVERSED and SET ASIDE. Rolando Limpo is
ordered DROPPED as a defendant in Civil Case No. 62226. No pronouncement as to costs.

SO ORDERED.

ADOLFO S. AZCUNA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Associate Justice
Chairperson

(On Sick Leave) (On Leave)

ANGELINA SANDOVAL-GUTIERREZ* RENATO C. CORONA**
Associate Justice Asscociate Justice

CANCIO C. GARCIA
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-39119 September 26, 1986

FELICIANA BUMANLAG and FLAVIANO BUMANLAG, petitioners,

vs.
HON. ANACLETO B. ALZATE, as Presiding Judge, Branch II, Court of first Instance of Tarlac,
TOMASA BUMANLAG, and SILVINO ESPUGADO, respondents.

Emilio D. Castellanes for petitioners.

Lauro O. Samson for respondents.

PARAS, J.:
On January 21, 1976, this Court declared as submitted for decision a case where the principal issue
was the validity of a compromise agreement (which subsequently was embodied in a judgment by
compromise) where the agreement was signed (on behalf of one of the parties thereto) by a lawyer
who did so without authorization if said party or client. We hold that a such compromise agreement
is merely unenforceable 1 (not void)and may therefore be ratified by said party expressly or implicity.2

In the instant case (which has been brought to Us by certiorari assailing an Order of the Court of
First Instance of Tarlac in Civil Case No. 4912 entitled "Bumanlag, et al. v. Bumanlag, et al.") herein
petitioners sued herein private respondents for partition of the lots inherited by both parties from their
deceased father; respondents however moved to dismiss on the ground that some years before a
final and executory judgment (based on a compromise agreement) involving the same parties, same
subject matter, and same causes of action had already been rendered by a court of competent
jurisdiction and that therefore the doctrine of res judicata clearly bars the present case; petitioners
contend that said judgment is void because the compromise agreement had been signed in their
behalf by their lawyer who had not been authorized by them to enter into such agreement,
consequently there can be no res judicata.

As already intimated hereinabove, the compromise agreement is not void but merely unenforceable.
The petitioners by their silence for sixteen (16) years and by their overt acts of exchanging or
bartering some of the lots awarded to them with some of the lots of the private respondents have
doubtless ratified the act of their attorney; ergo, the requisites of res judicata being all present, the
principle applies to the instant case.

One final point. The argument that the partition in the first case was not one with metes and bounds
is bankrupt. There was such a physical and actual partition, not merely a metaphysical one.

WHEREFORE, this petition is DISMISSED, and the assailed Order is hereby AFFIRMED, with costs
against petitioners.

SO ORDERED.

Feria (Chairman), Fernan, Alampay and Gutierrez, Jr., JJ., concur.

Footnotes

1 Art. 1403 (no. 1) Civil Code.

2 Art. 1403 (1st sentence), Civil Code.